• AUTO CHIP SHORTAGE TO WORSEN IN Q2
• USED CAR MARKET ‘HOTTING UP’
• LONDON DIESEL ‘BARGAINS’ RESOLD TO THE SHIRES
• H&M ‘FREE SUIT LOAN’ FOR JOB INTERVIEWS
• CARVANA IN SALE-READY STRUGGLE
• CHERYL MILLER RESIGNS AFTER 3 MONTHS
• STOCKWATCH – Inchcape continues its move away from retail with sale of operations in St Petersburg for £70m
• COMING UP – Inchcape update
• SPAC SLUMP AFTER ACCOUNTING CHANGE
• RETAIL ‘WORST HIT SECTOR’ FOR COVID JOB LOSSES

Chip shortage to worsen in Q2

Major OEMs are warning everyone in the auto industry to prepare for a bigger production hit in Q2 than Q1 due to the global chip shortage. Seat CEO Wayne Griffiths said it is the “biggest challenge” faced by the company at the moment with production currently “hand to mouth”. Decisions on which cars to build are made only after chips are received from suppliers.

Volkswagen Group production was down 100,000 in Q1 and it will worsen in Q2. CEO Herbert Diess has conceded the company will now not be able to make up the shortfall in 2021 and “further adjustments to production cannot be ruled out”.

Jaguar Land Rover last week confirmed shutdowns at Halewood and Castle Bromwich due to the semiconductor shortage, while Ford is shutting its Merseyside facility for a month and scaling back its Dagenham diesel plant. In Germany, Daimler AG has put 18,500 workers on short-time working through to the summer. Earlier in the year, Audi furloughed 10k staff to cope with the “crisis upon a crisis”.

Chuck Robbins, boss of networking giant Cisco, warns the industry the shortage is set to last for most of the year. “We think we’ve got another six months to get through the short term.” After that, new-build chip factories designed to stem the shortage will start coming onstream.

https://bit.ly/32Naqdi

 

Used car market ‘hotting up’ says BCA

BCA has reported a “significant and noticeable uptick in demand and increased average values” following the relaxing of lockdown restrictions. Average values rose 15.8% in a week and conversion rates grew 17%. Performance against guide values rose 1.7% to 101.9%.

The improving economic outlook and continued good news about the vaccination rollout has “generated a lot of positivity in the used vehicle sector,” said BCA COO Stuart Pearson.

 

London diesel ‘bargains’ resold to the shires

Retailers outside London are reportedly snapping up diesel vehicles from Londoners at “knock-down rates” as residents rush to get ready for the expanded ultra-low emission zone which goes live on 25 October – which is much stricter on diesel vehicles than petrols. “I didn’t want to pay £12.50 every time,” said one Londoner who swapped a 2015 Audi Q5 TDI for an Audi e-tron EV. The northwest is reportedly leading the way in snapping up unwanted vehicles not compliant with the London ULEZ.

Over the weekend, London Mayor Sadiq Khan urged residents to “abandon your cars to clean up the air”. Almost 340k Londoners will have to pay up to £4,500 to drive in the capital when the extended ULEZ goes live later this year. Mr Khan added that he is not “anti-car” in the interview with the Sunday Times.

https://bit.ly/3dR12LU

 

H&M ‘free suit loan’ for job interviews

H&M now allows people to rent suits for free for 24 hours to help those attending a job interview “make a powerful first impression”. The ‘one second suits’ are navy blue and customers return the suit in a prepaid bag to a dry-cleaning company. They won’t pay for minor damage but would have to pay the full retail price of the suit in the event of major damage.

https://bit.ly/2RTNwyw

 

 

WORLD NEWS

Carvana in sale-ready struggle

Carvana, which provided inspiration to Cazoo CEO Alex Chesterman, is struggling to scale up its sale-ready inventory. It’s proven difficult to ramp up its reconditioning capacity and inventory has fallen from 25k vehicles to 10k since the onset of the pandemic. The firm has been accused by some retailers of paying aggressive prices for wholesale vehicles at auction “but I don’t think that plays out in the data,” said CEO Ernie Garcia.

https://bit.ly/32Lnj7t

 

Cheryl Miller resigns after 3 months

Former AutoNation CEO Cheryl Miller has resigned as CFO of JM Family Enterprises (whose subsidiaries include the world’s largest independent Toyota distributor) after three months. She left AutoNation last summer after a medical leave of absence. Ms Miller started back at JM Family on 4 January after previously starting there in 2004 and being later promoted to VP and treasurer. She will continue to consult for JM Family until the end of 2021 with “potential” to continue beyond this, said a spokeswoman.

https://bit.ly/3eskzBz

 

 

STOCKWATCH

Closing prices on 23 April 2021 and weekly change

Inchcape continued its move away from retail with sale of operations in St Petersburg for £70m

Auto Trader Group 577.6p 574.6p (-3.0p / -0.5%)

Cambria 77.0p 75.0p (-2.0p / +2.6%)

Caffyns 370.0p 380.0p (+10.0p / +2.6%)

Halfords 380.2p 393.4p (+13.2p / +3.4%)

Inchcape 796.0p 799.5p (+3.5p / +0.4%)

Lookers 67.0p 69.1p (+2.1p / +3.0%)

Marshall Motor Holdings 175.5p (n/c)

Motorpoint 260.0p 256.0p (-4.0p / -1.5%)

Pendragon 19.95p 19.6p (-0.35p / -1.7%)

Vertu 45.5p 46.0p (+1.0p / +1.0%)

 

 

COMING UP

Wednesday, BRC shop price index

Thursday, Inchcape trading announcement

Thursday, Nationwide house price index

 

MONEY MATTERS

Spac slump after accounting change

Spacs have raised £130bn since the start of 2020. The deals are faster than traditional market listings and “promise vast fees for the executives who do them”. However, critics this week warned they are “a back door to the market for companies that are unproven, immature or unfit for life answerable to shareholders”. One hedge fund trader warns the boom will end badly for investors and leave “many casualties”.

The Securities and Exchange Commission has now acted. In an accounting change, it has advised warrants should be considered as liabilities on a balance sheet, rather than equities. Many Spacs may now have to restate their financials. Many Spac deals have now plunged and the Spac listing rush has “slowed to a trickle” in April.

Spacs have been growing in popularity and have drawn in big names including Sir Richard Branson, former Credit Suisse boss Tidjane Thiam and basketball star Shaquille O’Neal. In March, Cazoo finalised a merger with US Spac Ajax 1 to take it public in a £5bn deal.

https://bit.ly/3ezjiZz

 

Retail ‘worst hit sector’ for Covid job losses

Covid has led to Britain’s deepest recession on record and, from at least 167,450 jobs lost to coronavirus, retail has been the worst hit, according to Sky News analysis. The sector accounts for one in four total jobs lost, far ahead of aviation, hospitality and the wider economy. Not all companies have given price details on UK job numbers, it adds: ONS statistics report employees on UK payrolls is down by 726k between February 2020 and January 2021 – “much larger than our total”.

https://bit.ly/3gPT87F