Motorpoint warns of hit to profit from falling value of electric cars

Motorpoint is signaling weaker demand for used cars and a loss of profit due to a fall in value of electric cars.

The used and near-new car seller said revenues rose 17 per cent to more than £1 billion in the nine months to the end of 2022 as it witnessed a return to year-over-year retail volume growth in December and January.

However, the company also warned that gross profit per car would be lower than expected due to the plummeting value of used EVs, adding that this is likely to continue to affect profitability “for the foreseeable future.”

“Macroeconomic conditions continue to fuel consumer uncertainty, reducing demand for used cars,” Motorpoint told investors.

“While the company is not providing a specific earnings outlook, recent cuts in finance fees and lower gross margin, largely due to the well-documented drop in EV value, will negatively impact profitability and the board believes these macro factors will continue to affect sales and profitability. for the near future.’

Motorpoint shares fell 2.8 percent in morning trading on Friday to 141 pence. They have lost about 50 percent of their value in the past year.

Expensive used electric cars are dropping in value, with dealers having to lower prices to sell off the remaining stock as demand for used battery cars cools.

Earlier this month, industry figures showed that the value of used Tesla electric cars has fallen by a fifth in the past 12 months.

Used versions of the popular Tesla Model 3 – Britain’s second most bought new electric car – have fallen in value more than any other in the last 12 months, with year-old units seeing a huge average drop of 21 percent, which translates to a financial drop of nearly £10,000.

Chief executive Mark Carpenter insisted the group “get out of today’s depressed consumer market” and capitalize on struggling rivals to gain market share.

Motorpoint said it was on track to meet its medium-term growth target of over £1bn in online sales and over £2bn in total sales this year.

It has also invested an additional £5 million so far to increase market share and roll out more stores in new catchment areas.

The group plans to open two more stores in Ipswich and Milton Keynes in the first half of the next financial year.

This brings the total number of stores opened to seven since the strategy was announced in July 2021.

“Motorpoint will emerge from the current depressed consumer market into a more efficient company after making progress on several key strategic initiatives,” said Carpenter.

And added: “At a time when some of the Group’s competitors are withdrawing or lacking financial resources and as the current macroeconomic headwinds are expected to continue, the Governing Council believes there is a significant opportunity to continue to make strategic investments to increase market share and become a highly profitable market leader.’