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The new owner of UK car dealerships Stratstone and Evans Halshaw is preparing to cut hundreds of jobs after a collapse in the supply of used cars following the coronavirus pandemic.
US group Lithia agreed to buy Pendragon’s dealerships and its used car marketplace CarStore last year, following a protracted bidding war that involved former boss Trevor Finn working with Sweden’s Hedin Mobility.
Lithia, which also owns dealership group Jardine Motors, told staff on Tuesday it planned to close CarStore, according to people with knowledge of the announcement, following pandemic-era production issues that constrained the supply of second hand cars.
The company is preparing to cut roughly 250 roles across the UK, or about one in 20 roles, as a result of the move, the people added. Pendragon employed some 5,500 people in the UK.
The vast majority of the losses will come from closing 16 CarStore sites, including seven warehouse-sized showrooms that were intended to help drive down the cost of selling second-hand models through economies of scale.
Lithia will also consult on redundancies for dozens of staff in overlapping back-office functions, as it integrates Pendragon and Jardine, which it bought last year.
When contacted, a spokesman for Lithia said the business would be “going into consultation with a number of our colleagues around potential redundancies” after an “initial review” of the merged company.
They added: “We will be closing nine CarStore sites and seven CarStore pods this quarter in order to focus on Evans Halshaw and Stratstone.
“Four CarStore sites will be retained and re-franchised, expanding our retail operations with three existing carmakers, while seven remaining CarStore pods will become Evans Halshaw Direct sites.”
Finn, the former chief executive, took the helm at Pendragon in 1989 and grew it into the UK’s largest car dealer in the UK by buying up rival businesses. The company had shifted strategy within the past decade to focus more heavily on used vehicles, after an increasing number of carmakers opted not to work with the business.
CarStore was opened before the pandemic, with a model based on turning over a steady stream of low-margin used vehicles in large warehouses, facilitated by an abundance of used cars for sale.
However, the business was hit with a UK-wide shortage of second-hand vehicles from 2020, due to production stoppages linked to pandemic-era shutdowns following a global shortage of the semiconductor chips.
The industry’s production shortfall is now being felt, as the lack of two- to three-year-old vehicles leaves dealerships facing shortages in the popular second-hand market.
At one point in 2021, the shortage of new vehicles was so acute that the prices for used cars overtook the cost of new vehicles for the first time. The industry has warned that years of production disruption could lead to a shortage of used vehicles throughout this decade too.
The shift is the latest overhaul in a car-selling market that is in flux. Pendragon’s takeover, which included spinning off its technology business Pinewood as a separate listed entity, was the latest takeover of UK-listed dealerships.
Last week car distributor Inchcape sold its UK dealerships for £346mn. Marshall Motor Group has also been bought by Cinch-owner Constellation, while Lookers was bought by Canada’s Alpha Auto in a deal announced last year, and Cambria was taken private by its management team.
Only Vertu Motors and Caffyns remain listed on the London stock market.
This article has been amended since publication to clarify that Pendragon, not Lithia, employed some 5,500 people in the UK.
