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Pendragon and Motorpoint offer profit cheer despite car supply woes

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Car retailers Pendragon and Motorpoint have become the latest in the sector to deliver profit cheer as surging vehicle prices offset supply challenges.

Pendragon shares jumped 6% and Motorpoint lifted 4% as the two firms said new and used car values are helping to mitigate the impact of global chip shortages on the new car market.

Pendragon increased its 2021 profit outlook to around £70 million from the £55 million to £60 million previously guided, while Motorpoint’s half-year update showed pre-tax profits rose over 30% to more than £13 million in the six months to September 30.

It comes after fellow car dealerships Lookers and Marshall Motor Holdings upgraded their profit guidance on Wednesday, with the short supply of new cars sending prices rising, and giving a boost to the used car market.

But the groups have flagged worries over the ongoing impact of the semi-conductor shortages.

Pendragon said: “We remain cautious about potential further disruption from Covid-19 to both our local markets and global supply chains, and, despite our broad range of sourcing channels, the impact from ongoing shortfalls in both new and used vehicle supply for the remainder of this financial year.”

It added that used car prices should hold up for the next few months.

“Whilst we also continue to expect a realignment of used vehicle margins over time, we expect these to remain strong for the remainder of this financial year, providing us with some mitigation to lower new vehicle volumes in particular,” it said.

Figures published by the Society of Motor Manufacturers and Traders on Monday showed that the new car market plunged by 34.4% year on year in September – the all-important number plate change month – with registrations falling to the lowest level for more than two decades.

Semiconductor makers have been unable to keep up with demand as car manufacturers worldwide have ramped up after pausing production at the start of the pandemic, which has seen new car availability severely constrained.

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