Car retailer Pendragon has warned that the Ukraine conflict could worsen the shortage of new vehicles that has boosted prices across the market and allowed the dealership to post record profits for 2021.

The luxury motor group, which trades under the Evans Halshaw and Stratstone brands, said it benefited from the shortage in new cars as demand drove up the price of used vehicles handled by its CarStore brand. Used car revenue was up 43 per cent on the previous year, with profit margins on both new and used vehicles reaching “extraordinary levels”.

Chief executive Bill Berman said the sector is experiencing a “unique set of trading conditions” as a limited supply of semiconductors has disrupted vehicle deliveries around the world. This is expected to continue until at least the end of 2022.

“We expect existing supply chain constraints to continue in the current year, and we are mindful of the potential for further disruption to new vehicle supply chains as a result of the conflict in Ukraine,” Mr Berman said.

READ MORE: Car dealer fails to woo rival into talks

“Despite this, we have the right strategy in place and we expect to make positive progress towards our long-term goals this year.”

Commenting on Pendragon’s results, Begbies Traynor partner Julie Palmer noted that car dealers have been “roaring ahead” as shortages have kept a lid on discounting and sent prices for used motors spiralling.

“Some nearly new vehicles are selling for more than an identical model fresh off the line as drivers desperate for a vehicle won’t accept waiting lists that can run into many months,” she said. “Pendragon’s no exception with sales rising and profits hitting a new record, having made a loss last year.”

However, she added that there are further potholes ahead, with current circumstances potentially creating a bubble that could send the whole dealer industry into a crash.

“Many car makers are investigating an ‘agency’ model, selling directly to consumers and reducing dealers to just handing over new vehicles,” she said.

“The ban on sales of cars with only internal combustion engines in 2030 to drive the switch to electric vehicles is a further curve the industry must negotiate. Fears the infrastructure to support EVs won’t be in place may mean drivers hold off on buying an electric car until they are confident they can plug in anywhere, further reducing sales of new vehicles.”

READ MORE: Car dealer Pendragon warns on losses

Pendragon’s revenues for the year to the end of December rose by 18% to £3.44 billion while profits surged by more than 900% to £83 million, up from £8.2m previously.

The company attributed its success to its “digital capabilities” during the pandemic, which allowed it to “fulfil demand through a combination of full store experiences, home delivery options and click and collect”. It said it also benefited from a transformation strategy set out in late 2020 that included cost-cutting measures.

Headquartered in Nottingham, Pendragon was formed in 1989 following the demerger of UK conglomerate Williams Holdings. The group now represents 21 different vehicle manufacturers in the retail sector, with more than 160 sites across the UK.

Earlier this month, the group was the subject of a failed £400m takeover bid from rival European car dealer Hedin Group, which currently holds a 25% stake in Pendragon. Reports have suggested that Hedin – which operates more than 200 showrooms in Belgium, Norway, Sweden and Switzerland – many make another bid this year.

The London-listed company is not proposing a final dividend. Its shares closed yesterday’s trading 0.5p higher at 28p.