Motus feels the pain as South Africans dump luxury vehicles

Motus has flagged a growing trend of South African motorists buying down, with many choosing to delay upgrading their vehicle, not purchasing a new car, or seeking cheaper alternatives. 

This was revealed in the company’s interim results for the financial year ended 30 June 2024, where Motus said this trend was eating into its margins. 

As a result, the company’s profit after tax declined 27% from R3.3 billion in 2023 to R2.48 billion in 2024 – despite robust revenue growth of 7%. 

Motus operates some of South Africa’s most well-known car dealerships for brands such as BMW, Audi, Jeep, Mercedes-Benz, and Jaguar-Land Rover. 

It is also the exclusive importer of Kia, Hyundai, Renault, and Mitsubishi in South Africa. The company also distributes these vehicles and parts across Africa. 

In its results, Motus said there has been a distinct rise in competition from new vehicle brands that have come into the market at very competitive prices. 

This, coupled with higher-than-normal vehicle and parts price inflation, eroded the company’s profit margins. 

In South Africa, Motus’ import and retail businesses were negatively impacted by pressure on consumer affordability, a buying-down trend, and fierce competition. 

The availability of inventory improved significantly with the vehicle supply chain’s stabilisation, which impacted the margins on vehicles sold. 

The abovementioned discounts provided, in response to increasing competition from new brands, are having a negative impact on the margins, the company said. 

Its importing business was further impacted by currency volatility and increased costs on vehicles, particularly freight costs.

The company’s aftermarket parts business was also affected by a buying-down trend and increased costs. Delays at South Africa’s ports increased lead times for products, limiting availability. 

A buying-down trend has been noticeable in recent years in South Africa, with sales of luxury German brands such as BMW, Audi, and Mercedes declining while Suzuki, Haval, and Chery have seen meteoric growth. 

Motus’ results may indicates that this trend, and the general rise of Chinese brands, is affecting the sales of other Asian cars, such as Kia, Hyundai, and Mistubishi. 

Many of the challenges the company faces are not unique to South Africa, but have a greater impact on the company’s local business due to the poor performance of the economy and declining disposable income. 

Motus has flagged many of these trends for years now, and, in response, the company expanded overseas to Australia and the UK in particular. 

This limits its exposure to a volatile and weakening rand, providing a valuable source of foreign exchange earnings, and are generally more stable operating environments. 

These offshore operations supported the business and contributed strongly to the company’s profitability in the past financial year. 

A final dividend of 285 cents per ordinary share is declared on 2 September 2024 for the current financial year and is payable on 7 October 2024. This dividend will be paid out of income reserves.