Auto Trader’s shares declined despite rapid sales rates for pre-owned vehicles.
- Used cars are selling quickly due to high demand and limited new car production.
- The company’s revenue increased by 9%, yet share value dropped 5% on Thursday.
- Auto Trader is increasing AI utilisation to improve listing efficiency and consumer appeal.
- Expectations for moderated revenue growth in the latter half of the year were outlined.
Auto Trader’s market dynamics are notably shifting, as evidenced by a recent drop in its share prices by 5% on Thursday. This decline comes in contrast with a 9% increase in revenue to £284 million and a 15% rise in pre-tax profits to £188 million for the six months ending in September. Despite financial growth, investor concerns appear to be influenced by other market factors.
CEO Nathan Coe highlighted a robust demand for used cars, attributing it to a shortage of new cars manufactured three to four years ago, which has now resulted in constrained supply in the used market. “Because of the number of consumers that we’ve got on Auto Trader and a shortage of stock, cars are selling very very quickly and that does directly impact our business model,” Coe stated. This high demand is occurring despite a downturn in new car sales, influencing the balance between stock availability and consumer interest.
However, Auto Trader’s stock remains approximately 30% higher over the past year, reflecting an underlying confidence in the market’s trajectory. In response to current trends, the company is intensifying its use of artificial intelligence. Through new software developments, such as the Co-driver tool, Auto Trader aims to significantly reduce the time needed for creating car and van listings by enhancing process efficiency. This software will allow retailers to access its full features through Auto Trader Portal accounts and integrate them with third-party systems.
Nathan Coe elaborated on the advantages of the AI tool, stating that it enables dealers to harness over 600 million minutes of consumer behaviour each month. With AI models, Auto Trader can discern the specifications that make one car model more attractive over another, ensuring accurate car valuations and targeting the right consumer segments. “It makes sure the cars are valued right and makes sure they’re appealing to the right consumers…and it makes the job of our retailers much better,” Coe explained.
The company anticipates a slight moderation in revenue growth for the second half of the year, although growth will persist. This foresight aligns with the current strategic approaches and technological advancements being applied to meet market demands effectively.
Auto Trader’s evolution through AI and market adjustments illustrates its adaptive strategies amid shifting industry conditions.
