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Car dealer Pendragon plunges as new pollution tests put brake on sales

Alan Tovey
Car manufacturers have suffered disruption to supply because of a new emissions testing regime - Getty Images

Shares in car dealership Pendragon plunged as much as 20pc after it warned over profits because of a new vehicle emissions testing regime.

Pendragon, one of the largest car dealers in the UK, said the introduction of the worldwide harmonised light vehicle test procedure (WLTP) had caused “significant disruption” to sales of new cars and “uncertainty” over the supply of stock.

WLTP was introduced in the wake of the VW “dieselgate” emissions scandal. The new tests - which came into force in September - aim to give a more accurate measure of the pollution produced by cars in real-world driving conditions than the previous regime. 

However, a bottleneck in testing facilities means manufacturers have been unable to get all their cars examined under WLTP conditions, and without doing so the vehicles cannot be sold.

Many car makers rushed through sales in August to beat the new regime, but dealers are now unable to get enough cars to sell.

Pendragon owns the Stratstone car dealer chain Credit: PA

Official data showed that new car registrations in the UK fell by 20.5pc in September to 338,834 and Pendragon said a “similar trend” had continued into October. Sales are normally strong in September because of the registration plate change.

Pendragon said WLTP had “caused significant new vehicle supply disruption which gives us cause for concern over the coming months for new vehicle sales and profitability. This will clearly have an effect on the group”.

The company, which has almost 200 dealerships, said that it now expects underlying pre-tax profit for the year to be £50m, down £10m on market forecasts.

The update dragged down fellow listed car dealer groups Lookers and Marshal Motors by about 2pc.

The WLTP testing bottleneck is having a wide impact across the European motor industry. BMW partly blamed it for a profit warning last month and Mercedes owner Daimler has also said it is holding the company back.

Car manufacturers and dealers have privately said they expect the supply problems to continue into next year before the disruption eases.

Pendragon also said it had continued its plan to invest in its used car business - which has higher margins than new car sales - and is rolling out “used car factories” to refurbish secondhand cars. 

The company said this was having a “short term dilutive effect” because of the “significant” costs involved. However, Pendragon said demand for used vehicles was giving it “encouragement for the future growth of this part of the business”.