New car shortages to drag on for a year

The chief executive of car leasing group Eclipx expects the new vehicle supply shortage to last for another year and prices of secondhand vehicles, which are 30 per cent higher than pre-pandemic levels, to stay elevated until late next year.

Julian Russell, who presided over a robust jump in net profit after tax to $76 million for the 12 months ended September 30, compared with $18.2 million a year ago, said the biggest issue curtailing the supply of new vehicles was a shortage of semiconductors which in turn had forced car makers to reduce production levels.

Shipping logjams and logistics issues caused by the COVID-19 pandemic had also played a part.

“It’s largely semiconductors, and the secondary issue is logistics,” he said.

Delays in new cars arriving in Australia because of a shortage of semiconductors for advanced vehicle componentry have meant that new car buyers are having to wait six to nine months for a vehicle on order to actually arrive. Japanese carmakers including Nissan, Toyota and Honda have estimated they will make a combined 1.3 million fewer vehicles this year, which equates to about 5 per cent of Japan’s total annual output.

Eclipx operates brands including FleetPlus, FleetPartners and FleetChoice which have about 93,000 vehicles on their books through novated leases and fleet management arrangements.

Mr Russell said the knock-on effect to the secondhand vehicle market of new vehicle delays had been a sharp rise in used car prices. “It is a supply and demand function,” he said.

Used car prices would stay high until the new car supply issues were back to normal, which he expected would occur in the December quarter of calendar 2022.

“That’s our best guess,” he said. Eclipx benefits when it sells vehicles back into the marketplace at the end of a lease.

Eclipx had experienced a 42 per cent rise in vehicle lease extensions compared with a year ago. People who had taken out a three-year lease were often choosing to extend it because of the backlog in the supply of new cars. Those in charge of vehicle fleets at larger companies were already factoring in wait times of up to nine months for a vehicle changeover.

Mr Russell took over as chief executive in May 2019. 

He sold six non-core businesses and cut costs aggressively early in his tenure. Eclipx offloaded loan car business Right2Drive in mid-2020, and earlier sold a string of businesses including Grays Online, Eclipx Commercial, Georgie, areyouselling.com.au and Carloans.com.au.

Mr Russell said the group was in a strong position now and while it had its eye on some potential acquisitions it would stay financially disciplined.

“We’re always looking at something,” Mr Russell said.

“We’ll still be fussy,” he said.

Eclipx shares gained about 3.7 per cent on Wednesday to $2.56 in afternoon trading on the ASX after the strong profit results. The stock is at its highest in almost three years. Mr Russell said he would strenuously avoid a situation where Eclipx had temporarily lost its way under previous management when acquisitions were poorly integrated after a spree in 2016 and 2017.

“We don’t want to have a repeat of the history here,” he said.

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