WeBuyCars loses its shine

WeBuyCars’ share price has hit a new 52-week low, with the company’s market value falling by 45% over the past year. 

This comes as WeBuyCars finds itself under increased pressure from the rise of Chinese car brands in South Africa and the surge in new-car buying activity. 

These forces are intertwined, with Chinese cars offered at attractive price points, boosting new-car sales in the country. 

The cars are offered at such an attractive price point that they are winning over buyers who would have historically purchased used cars. 

The low prices offered by Chinese brands have forced traditional manufacturers, such as VW and Toyota, to lower their prices. 

This has broadly made new cars cheaper in South Africa, making used alternatives less attractive to buyers as the price differential compresses. 

As a result, used-car sellers like WeBuyCars have had to adapt and, in this case, reduce their prices. 

This has squeezed WeBuyCars’ margins as it cuts prices to attract buyers back to used cars, which has investors concerned about the company’s prospects. 

Data from Standard Bank’s Vehicle and Asset Finance division revealed just how threatening the rise of Chinese brands is to WeBuyCars. 

Analysing the buying behaviour of young South Africans who historically purchased used cars, the bank found that 70% buy a second-hand car as their first vehicle. 

However, the opposite is true for those buying Chinese cars: 67.9% purchase them brand new. 

As Chinese cars continue to surge in popularity, they pose a threat to WeBuyCars and other used-car sellers. 

Standard Bank’s data shows that financed purchases of Chinese cars surged by 423% between 2021 and 2025. These deals now account for 11% of all vehicles purchased by bank clients under 35. 

WeBuyCars believes that the rise of Chinese cars will ultimately be a tailwind for the company, as it will widen the range of vehicles it can stock. 

As these new Chinese cars filter into the used-car market, WeBuyCars will be able to compete more directly with new vehicles. 

However, it is unclear how well Chinese cars will hold their value or what they will sell for on the used-car market, creating uncertainty for investors. 

Analyst opinion

Analysts believe the fall in WeBuyCars’ share price has opened up a buying opportunity for investors looking to benefit from macroeconomic tailwinds. 

The fall in valuation has opened up an attractive opportunity to invest in one of South Africa’s fastest-growing large businesses. 

More importantly, as inflation remains elevated, analysts expect South Africans to switch back to buying used cars. 

One such analyst is Element Investment Managers’ Keith McLachlan, who told BusinessDay TV that WeBuyCars is still a well-run company. 

“We are a valuation-sensitive investment house, and you don’t always get opportunities where good businesses offer you cheap valuations,” McLachlan explained. 

“But when they do, you have to act on them. WeBuyCars is one of those companies currently on the JSE.” 

McLachlan admitted that the impact of Chinese brands is real, but explained that it has been factored into the valuation, and that the risk-reward balance is now favourable for buyers. 

“Over the last few years, buyers could purchase, for the same price as a used car, a brand new Chinese car,” McLachlan said. 

“That caused a forced reset in the stock’s valuation. They took the hit, and it came through in the gross profit margin. It has washed through the system.”

“The reset is in the base, and we think that the fundamentals remain very, very attractive. The valuation is now in favour of the buyer.” 

Sasfin Wealth’s Ntsika Ntsokolo broadly agrees with McLachlan, but added that WeBuyCars should benefit from the current economic backdrop.

“The current environment of high inflation and just generally how much new vehicles cost makes the second-hand car market attractive,” Ntsokolo explained. 

In previous periods of high inflation, such as immediately after the end of the Covid-19-era lockdowns, WeBuyCars performed extremely well. 

Ntsokolo also viewed the recent sale of shares by WeBuyCars’ founders as a positive, as it introduces fresh liquidity into the market. 

“The recent sale brings so much liquidity to the stock that it reflects an opportunity for retail investors to get into the share pretty easily,” he said.