Car dealerships Lookers and Marshall Motor Holdings have upgraded their profit guidance despite the industry’s global chip shortage thanks to soaring demand for used cars and higher prices.
Shares in the firms jumped higher on the profit cheer, which comes despite a marked hit to the supply of new cars as manufacturers battle to secure semiconductors.
Lookers, which saw shares leap as much as 9% higher, said full-year underlying pre-tax profits would be “materially ahead” of previous expectations thanks to a jump in used car sales and higher prices across the board.
Industry figures on Monday revealed 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.
Lookers said it outperformed the wider market decline by 3.4 percentage points, but still saw unit sales tumble.
It said used cars have been in high demand as a result of the chip woes, with supply in the second-hand market also failing to match demand, seeing sales of used vehicles fall 16.9% in the three months to September 30.
However it said “excellent” profit margins on both new and used cars was helping offset the supply chain woes, as well as a tight rein on costs.
It also said interest in electric vehicles had continued to increase, with the recent fuel crisis adding to the jump in demand.
The group said: “The well-documented global shortage of semiconductors has continued to place increasing pressure throughout the third quarter on the supply and availability of new vehicles, with used vehicles in strong demand as a consequence.”
Chief executive Mark Raban added the group had “performed strongly in a challenging market”.
Marshall Motor Holdings, which is listed on London’s junior Aim market, enjoyed a 12% shares boost as it too said higher prices were mitigating the supply issues.
It said used car values had rocketed by 12.7% in the third quarter and were up by an “unprecedented” 26.3% over the past seven months.
Marshall, which also said it outperformed the wider new car market by 13%, is now expecting underlying profits of at least £50 million in 2021, up from at least £40 million it guided for in August.
But it cautioned that the chip and supply issues will not ease off any time soon.
Marshall said: “New vehicle supply constraints caused by the global shortage of semiconductors have deteriorated throughout August and the important plate-change month of September and are expected to continue through 2022.”