Combined Motor Holdings (CMH) says almost half of its new vehicle sales are Chinese and Indian brands, which have displaced traditional marques for SA consumers.
The surge in Chinese and Indian brands helped CMH’s motor retail and distribution unit report a more than twofold increase in pretax profit in the six months ended August.
The JSE-listed group, which has more than 100 dealerships across the country, said the shift from luxury vehicles to more affordable ones is gaining momentum, led by Chinese and Indian brands.
“These vehicles now represent nearly 50% of group new vehicle sales and have placed enormous pressure on the group’s traditional favourites — Nissan, Ford and Volvo — which now struggle to match their pricing and feature-rich offering,” the company said on Tuesday.
The group’s interim results were well received by the market, with the share price surging more than 7% on Wednesday.
- Chinese and Indian brands now make up nearly half of SA’s new car sales.
- Their affordability and features are displacing favourites like Ford and Nissan.
- Signals a major shift in consumer trends and global auto market dynamics.
CMH also announced it will buy back shares.
“The group currently has, and has had for a number of years, cash resources which are surplus to its present and reasonably foreseeable requirements. Having reviewed cash flow projections, the directors do not anticipate that the resources will be required in the next 12 months for operational or other reasons,” it said in a statement accompanying its interim financial statements.
“Consequently, the directors believe that, rather than earn a relatively low interest return on the surplus funds, optimal use thereof can better be made by returning the surplus to shareholders by way of a pro rata share repurchase offer.”
Revenue climbs amid steady sales
The group reported a 16.3% increase in revenue to R7.6bn in the six months under review and a 22.7% jump in headline earnings, though it cautioned that the surge in headline earnings was partly due to weak economic conditions a year earlier.
CMH, valued at R2.6bn on the JSE, said indications are that the second half of the financial year will produce marginally better economic conditions.
“Modest but steady growth in national new vehicle sales will underpin the retail/distribution segment, with the possibility that an improved Foton [brand of vehicles] contribution could provide a welcome bonus,” it said.
“At the time of writing, the national new vehicle sales for September have just been released. Boosted by the additional Chinese entrants, the market recorded its strongest month in a decade, with 54,700 unit sales. It also represents the third consecutive month of volumes above 50,000.”
Motus, SA’s leading non-manufacturing automotive group with more than 300 dealerships, conceded earlier this month that it had been slow in introducing Chinese brands that have proven popular with cash-strapped consumers.
Motus group CEO Ockert Janse van Rensburg said it had been a mistake not to introduce Chinese brands sooner, and the group now playing catch-up.
“In our retail business in SA our strategy regarding Chinese brand representation was initially too defensive."
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.