Pendragon, Britain’s biggest car dealer, said it would remain in the red this year because of a tough market that has forced it to slash prices of used cars.

The company, which trades under the Evans Halshaw, Stratstone and Car Store brands and sells all the main marques, predicted a small pre-tax loss in 2019, excluding proceeds from US disposals.

Pendragon warned that the first half of the year would be “significantly loss-making ahead of returning to overall group profitability for the second half”. Its share price plunged almost 23%.

City analysts had expected the company to make a profit of almost £35m this year. Last year it posted a pre-tax loss of £53.2m after a £92m writedown. Analysts at Jefferies are forecasting a £6.9m loss before tax for 2019, having previously predicted a profit of £31.4m.

Pendragon, which has 32 stores that only sell used cars and 177 franchised dealerships, said there were “significant” declines in prices in the used-car market, with dealers having to discount heavily to shift excess stock. The firm was left with used cars worth £458m at the end of 2018, up from £372m a year earlier. Prices are also being slashed to enable carmakers to hit volume targets.

The company’s used-car stores ran up losses of £11.9m in 2018 and these are expected to widen to £25m this year, partly because of higher costs, particularly in after-sales.

Industry figures out last week showed new car sales in the UK fell 4.6% in May year on year and were down 3.1% for the year so far. The car industry has been hit by weaker consumer confidence as Brexit uncertainty remains, and by a slump in demand for diesel vehicles because of confusion over new emissions rules in the wake of the “dieselgate” scandal.

Pendragon wants to pull out of the US to focus on the UK used-car market, which it still sees as an “exciting opportunity” despite the current problems. It announced the sale of two dealerships in California for £60m in May.

The firm’s new chief executive, Mark Herbert, is carrying out a full review of its businesses that could lead to the breakup of the company and will announce the outcome in September.

Herbert took over from Trevor Finn on 1 April. Finn retired unexpectedly after almost 30 years at the helm.