Vehicle Shortages Boost Gross Profits at Pendragon and Motorpoint

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Pendragon and Motorpoint car dealers’ profits boosted by vehicle shortage and soaring used engine prices

  • Lookers and Marshall Motors both said improved earnings forecasts yesterday
  • Motorpoint saw gross profits for the first time increase by around 58% compared to same period last year
  • Vehicle shortages are partly due to a severe shortage of semiconductors










Two major UK car dealers have revealed that vehicle shortages have helped them earn high gross profits.

Midlands-based companies Pendragon and Motorpoint Group have both said they have recently benefited from strong used car sales, although they have expressed concerns about the potential for further disruption from Covid-19.

Pendragon said after an impressive performance in the third quarter, he now expects to make a pre-tax profit of £ 70million this year, compared to his previous estimate of £ 55-60million.

Uprising: After an impressive performance in the third quarter, Pendragon forecasts a pre-tax profit of £ 70million this year compared to its previous estimate of £ 55million to £ 60million

Meanwhile, Derby-based Motorpoint attributed the rise in vehicle prices, coupled with strong demand for used engines, to helping first half gross profits rise around 58% year-on-year.

Record sales were made by the group in April and May before car shortages caused a trade slowdown in June, although second-quarter used car purchases still rose to more than double the rate of. growth of the UK automotive market.

Its total revenue and online retail sales jumped by more than half, while its Auction4Cars.com division’s revenue increased by around 38%.

Managing Director Mark Carpenter said: “We are firmly set on significant growth goals and the investments made to date in technology and marketing will continue to grow to meet our goal of doubling revenues over the medium term.”

Pendragon provided fewer details on its sales performance today, but said shortages of new and used transport cars were offset by cost savings and a high gross profit margin on the cars sold.

The firm said continued strength in used vehicle prices partially helped gross profits in this category exceed expectations last month and expects this favorable situation to continue for the remainder of the year.

Record deliveries: Motorpoint Group said it achieved record sales in April and May before car shortages slowed trade in June

Record deliveries: Motorpoint Group said it achieved record sales in April and May before car shortages slowed trade in June

The updates from the two companies come a day after other car dealers Lookers and Marshall Motor Holdings improved their earnings forecasts, with the shortage of new cars driving up prices and boosting the used car market.

One of the main reasons for the supply shortage has been the strong demand over the past 19 months for products made with semiconductors, such as computers, televisions and smartphones, as people more often stayed at home.

Trade tensions between the United States and China and the inability of chipmakers to meet demand for semiconductors from automakers since the rebound in demand have further led some auto factories to cut production.

Automakers who announced production cuts last month include Volkswagen, which extended cuts at its Wolfsburg plant until October, General Motors and Toyota, which said annual production cuts of 300,000.

Big chips: One of the main reasons for the shortage of vehicles has been the growing demand for products made with semiconductors, such as computers, televisions and smartphones.

Big chips: One of the main reasons for the shortage of vehicles has been the growing demand for products made with semiconductors, such as computers, televisions and smartphones.

However, travel restrictions, closing auto showrooms, and public health advice for working remotely have caused people to use their cars less frequently and have less incentive to upgrade.

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Pendragon said: “We remain cautious of other potential disruptions from Covid-19 in both our local markets and global supply chains, and, despite our wide range of supply channels, the impact of continuing shortages in the supply of new and used vehicles for the remainder of this fiscal year. ‘

“While we also continue to expect a realignment of used vehicle margins over time, we expect them to remain strong for the remainder of the year, giving us some mitigation to reduce sales volumes. new vehicles in particular. “

Figures released by the Society of Motor Manufacturers and Traders on Monday showed the new car market plunged 34.4% year-on-year in September – the biggest month for the license plate change – with registrations dropping at their lowest level in over two decades. .

Pendragon shares closed up 6.9% at 18.7p on Thursday, but Motorpoint Group was down 3.8%.

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