Moment of truth for WeBuyCars

WeBuyCars plans to win back investors’ favour by focusing on the company’s North Star of growth and taking market share, even if this comes with short-term financial pain. 

The company believes it is investing ahead of the curve in capacity and capabilities that will ensure the strong momentum it showed towards the end of its latest reporting period continues. 

These investments, which include a potential money-spinner in Inspectify, aim to ensure the company’s growth accelerates once again. 

Perhaps more importantly, the company’s investments in technology are set to make it more efficient, helping it to generate more cash that it can return to shareholders or invest in future opportunities. 

However, this is coming with some short-term financial pain amid a rise in affordable Asian-made vehicles and increased competition. 

WeBuyCars believes the rise of Asian vehicles will eventually become a tailwind as the stock enters the used-car market, enabling it to compete more effectively with new vehicles. 

It has also pointed out that the prevailing macroeconomic environment of its interim 2026 results will not last forever, with interest rate hikes on the horizon.

Things are not as clear from the investors’ point of view, with the company’s valuation falling by 21% year to date, shaving off over R6 billion in value. 

WeBuyCars’ interim results seem to give evidence to some investors’ concerns that the company’s growth is slowing and it is struggling to win against rising competition. 

While revenue grew by 7.8% to R14.2 billion, the company managed this by changing its selling patterns, which squeezed margins. 

As a result, operating profit fell by 4% to R701.1 million, and headline earnings per share slid by 1.7% to 119.7 cents. Net cash generation fell 77% to R65.4 million. 

The company explained that this was the result of a deflationary environment, with the prices of used cars falling amid the rise of affordable Asian brands and a response from established players. 

WeBuyCars, in this environment, said it was forced to adjust selling prices downward, squeezing its margins and impacting cash generation. 

Short-term pain for long-term gain

WeBuyCars made it clear during the investor presentation that it saw these fluctuations as natural in the used-car market, with the company now focusing on what it can control to perform through the cycle. 

In particular, deputy CEO Wynand Beukes explained that the company remains focused on its ‘North Star’ of growth and market share. 

The aim is to make sure that WeBuyCars is the dominant player in South Africa’s used-car market, capturing value through access to a larger data set, higher volumes, and, ultimately, pricing power. 

“We are down 1.6% in terms of earnings per share, but that reflects our investment ahead of the curve in a deflationary market that we have been doing throughout the first half,” Beukes told Business Day TV. 

“We used this half to gear for future growth targets that we have set ourselves, and that is our North Star. It is all about growth.” 

In other words, the company is investing in its expansion through the cycle to ensure it is able to capture value from the future growth of the used car market. 

Many of its competitors do not have this luxury, with WeBuyCars aiming to use the pressures of a deflationary market to take market share. 

“The positive of the first half was the positive momentum shift in the second quarter, where we had a record buying month in January, a record selling month in March, and a record market share in March,” Beukes said. 

“All of this happened in one quarter, making us very positive about the momentum in the business.” 

This indicates that WeBuyCars continues to take market share from its competitors, positioning it well for a potential upswing in the used market. 

A potential upswing may be closer than expected, with inflation on the back of rising petrol and diesel prices likely to push the Reserve Bank to hike rates by 50 basis points. 

This makes new vehicles less affordable and, following historic trends, will push buyers into the used car market for affordable alternatives. 

However, the unknown here is whether buyers will simply shift to cheaper new cars offered by Chinese marques as they buy down rather than shift to the used market. 

Beukes believes the company will ultimately benefit from the rise in Chinese vehicles, with it able to compete more effectively once WeBuyCars can stock those cars. 

“It all starts with market share. It is our North Star. It is our strategic intent to grow our market share, and for the last number of years we have watched that closely,” Beukes said. 

“The trajectory has been positive in line with our efforts. It was 8.3% in 2023, and now, in the first half, it is 10.55% and has crossed 11% more recently. We have done this despite the tough environment.” 

“The trend in the market share is there, and that is why we are positive going into the second half of the year and until 2030. We are moving in the right direction.”