In Transaction Capital’s latest trading statement, the owner of WeBuyCars (WBC) revealed that it expects the vehicle retailer to take a roughly 20% hit in earnings for the financial year (FY) ending 30 September 2023, in line with the business’ half-year performance.
This is against a backdrop of an extremely high comparator year in FY2022 where WBC achieved record sales due to a low supply of new vehicles and inflated prices on the used-car market.
“WeBuyCars has consistently gained market share in FY2023, despite a tough economic environment as well as a recovery in the supply of new vehicles that have put pressure on average selling prices, margins, and inventory turns,” said the statement.
“However, it is encouraging that all of these measures have improved in the last few months, and the adjustment in our stock and trading mix towards cheaper vehicles, is now aligned with current consumer demand.”
No changes planned for the moment
WBC has no major changes planned for the near future, including a halt on further branch expansion, as it will instead prioritise growing into its existing infrastructure in order to “increase cost efficiencies, improve unit economics, and create operational leverage,” said Transaction Capital.
The number of vehicles bought and sold by the company has steadily continued to increase, with the average number of cars sold per month remaining at approximately 12,000 in the second half of FY2023.
The biggest driver behind higher sales volumes at WBC is purchases by private individuals, which in turn facilitates an increase in finance and insurance (F&I) income.
“The structural elements supporting the medium and long-term outlook for the used vehicle market in South Africa remain positive,” said Transaction Capital.
“Demand for more affordable used vehicles remains high as elevated inflation and rising interest rates erode disposable income.”
As such, F&I revenue is expected to continue rising as WBC evolves its offerings through Gomo and other third-party providers.
“Gomo is a joint collaboration between WeBuyCars and Mobalyz and originates debt agreements for consumers to acquire pre-owned vehicles,” said Transaction Capital.
Through Standard Bank, Gomo provides an all-in-one solution for car finance, insurance, and maintenance solutions, and over the last financial year it has significantly increased its trading volumes as it continues to expand across South Africa.
Keyword: WeBuyCars expected to take a big hit this month