WeBuyCars plans to open more warehouses in towns and cities as the demand for pre-owned cars grows. It has plans to nearly double the number of vehicles it sells to 23,000 a month in the next five years.
It also plans to introduce a car leasing or subscription model to its portfolio for customers who don’t want the cost burden that comes with car ownership.
The company made its debut on the JSE this week after it was unbundled from Transaction Capital as part of the ailing JSE-listed taxi financing group’s plan to raise capital to reduce debt. .
CEO and founder Faan van der Walt said that when it comes to buying cars “we are represented everywhere, in every town across the country”. They have 340 buyers.
From a selling perspective, the company has 15 large vehicle supermarkets or warehouses, mostly in Gauteng, KwaZulu-Natal, Eastern Cape and the Western Cape, and also in Polokwane, Limpopo and Mbombela in Mpumalanga.
“We would like to open supermarkets in Rustenburg, North West, around the Vaal triangle, south of Johannesburg, Bloemfontein and East London. Within the big provinces like Gauteng and Western Cape, we will open more branches.”
If history is anything to go by, we will continue on this growth trajectory because the market is way big enough
— CEO and founder Faan van der Walt
On leasing and subscription of cars, Van der Walt said the company’s plan was to start offering car subscriptions with guaranteed buybacks when the contract expires. “We want to take the risk away from the consumer. When someone buys a car they don’t really know the full costs of ownership. The more subscription is done, the more competitive that market will become. So I'm excited about that.”
Car subscription or leasing options have been in existence for many years, but most have been designed for corporates. With many consumers financially distressed and unable to afford to buy cars outright or finance them, car makers and dealerships are coming up with different ownership options to enable people to access vehicles at affordable monthly fees without having to pay for maintenance, and in some instances, insurance.
WeBuyCars, which was started 23 years ago by Van der Walt and his brother Dirk, has 2,800 employees and trades about 14,000 vehicles per month. Its website which has a catalogue of cars on sale, receives 5-million visits a month.
Demand for affordable used cars continues as high inflation and rising interest rates erode consumers’ disposable income. This trend is given further impetus by rising prices of new vehicles as manufacturers face inflationary pressure compounded by a depreciating currency. Naamsa reported early this month that new-vehicle sales for March were down 11.7% to 44,237 units from the 50,114 vehicles sold in March 2023.
Van der Walt said when new cars are in a slump there is positive movement in the sale of used cars.
“But conversely, when new car sales are doing well, most of those individuals buying new cars are offloading their used cars and both these scenarios do well for us. So we don't have these big changes depending on the market changes. The market is definitely dynamic. You also see certain brands gaining traction and others losing traction. Good examples are expensive German cars that have really gone down in market share while Chinese brands are flying at the moment and selling more.”
He expects the pre-owned vehicle market to dominate the sector, and that only when interest rates start dropping will new vehicle sales start picking up.
WeBuyCars share price opened at R19.91 on Thursday, ending the day at R20.40. On Friday it closed at R20.50 with a market capitilisation of just over R8bn.
Chantal Marx, head of investment research at FNB Wealth and Investments, said: “We still think it can move a little higher based on the fundamentals and it seems investor appetite is decent.”
She said WeBuyCars is unique in the sense that it only focuses on the used car market, which eliminates the impact of the rand and complexities of import and distribution faced by other listed vehicle retailers. Used vehicle sales were growing and being a trusted name in this space would likely lead to continued market share gains.
In research published on the WeBuyCars website two months ago, Anchor Stockbrokers said the key to its success had been in-house developed software, AI and machine learning technology that ensures the company buys and sells vehicles at a fair price, resulting in a good experience for both the buyer and seller, while generating a margin. “Earning trust in a rather distrusted industry like the used car market is fundamental to ensuring sustainable growth,” it said.
WeBuyCars also offers financing via the big banks and Transaction Capital’s GoMo unit, as well as insurance through third parties.
“At this point we don’t see them internalising these functions but rather building on the relationships they currently have. Management has noted that they will continue to look for financing solutions for older vehicle models that the big institutions don’t finance. They are not looking at expanding outside of South Africa and are really focused on expanding the current business more and growing market share,” said Marx.
Van der Walt said: “The listing opens up many opportunities, such as enhancing our brand, creating liquidity for shareholders, and attracting staff.”
“So part of the growth plan is just to continue doing what you are doing; marketing very well, recruiting the right individuals and just buying more and more and more vehicles. Over the last four years, we have doubled ... we were only buying and selling below 7,000 cars a month. Right now it's 14,000.
“I think our plans aren't pie in the sky. If history is anything to go by, we will continue on this growth trajectory because the market is way big enough for this type of growth still to happen.”
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