Used Vehicles Sold More Than Book Value – CEO of Motus
Used vehicles in South Africa are currently selling for more than their book value due to stockouts and this trend is expected to continue for at least three months.
This was confirmed on Wednesday by Osman Arbee, CEO of JSE-listed automotive distribution group Motus.
Motus reportedly sells one in five new vehicles sold in South Africa.
Arbee told Moneyweb that the shortage of used vehicles has been caused by constraints on the supply of new vehicles around the world and in South Africa as a result of the global semiconductor shortage.
Read: Chip crunch will last until 2022, Toyota supplier warns
However, he said those shortages had not resulted in losses at dealerships due to the lack of vehicles to sell.
“We always continue to sell new vehicles that we own and we receive used vehicles, while the workshops and parts business is doing quite well,” he said.
Arbee said the used vehicles are selling at “more retail at the moment.”
“Nothing retails for less. No one talks about book value anymore. Everyone sells at trade plus.
“This will continue for some time until the supply of new vehicles returns to normal, which we believe could take up to about three months,” he added.
He said the semiconductor shortage has also made it difficult for customers to supply new vehicles with the specific color or specification of the model they want to purchase.
Read: Used car prices rise as rushed shoppers look for ‘bargains’
Mikel Mabasa, managing director of the Naamsa Automotive Company Council, also said on Wednesday that global semiconductor shortages continue to negatively affect vehicle production and, therefore, the international and domestic availability of high-end models in particular. .
Hard blow for the industry
Arbee said the Covid-19 pandemic had deeply affected companies in the South African auto industry, with 536,612 vehicles sold before the pandemic in 2019 and only 380,206 vehicles sold in 2020.
He said the projection is that between 430,000 and 450,000 new vehicles will be sold in South Africa in 2021, but Motus expects slightly better total annual sales in the industry of between 450,000 and 470,000 units over the course of the year. ‘group financial year until the end of June 2022..
He added that Motus is hoping that this sales growth will come from car rental companies, with Europcar and Tempest and Motus’ competitors starting to “go up in the fleet”.
“We hope that the market will be able to recover around 20,000 to 25,000 cars from this [sub] sector by June of next year and that will give us some growth as an industry in fiscal 2022, ”said Arbee.
Read: Elon Musk calls Renesas and Bosch chip supply ‘problematic’
Mabasa said factors that will drive the inevitable demand for new vehicles include the positive macroeconomic outlook, rejuvenation of rental fleets, subdued consumer price inflation and interest rates that remain at historically low levels in the region. the foreseeable future.
However, he noted that business and consumer confidence will continue to challenge the industry’s recovery in the short to medium term.
Durban Car Terminal
Jabu Mdaki, Managing Director of Durban Terminals at Transnet Port Terminals, said on Wednesday that signs of a gradual recovery in the automotive industry are evident in volumes at the Durban Automotive Terminal, which rose 7% per year. compared to those reached in the first quarter of fiscal year 2019/2020, a period before the advent of Covid-19.
He said the terminal was anticipating a record year in the automotive industry, with August 2021 breaking a record by processing 54,520 fully built units in a single month.
The previous Durban Car Terminal handling record of 51,407 fully-built units was set in June 2021.
Mdaki noted that the terminal recorded volumes 65% above budget in the first quarter of fiscal year 2021/22.
He added that as the largest automotive terminal in sub-Saharan Africa, the terminal manages more than 520,000 fully-built units per year, of which 55% are exports, 10% transshipments and 35% imports.
Regarding Motus’ latest financial performance, Arbee said the group recorded strong operating results in the year ending June 2021 with fantastic cash flow.
He pointed out that Motus increased its overall vehicle sales by 10% to 228,633 vehicles from 208,778 the previous year, with new vehicle sales increasing by 6% and used vehicles by 13%.
The group maintains its market share at 16%.
Arbee said every major financial figure for the year through the end of June 2021 has exceeded their expectations and exceeds the group’s pre-Covid-19 number in June 2019.
Read: New vehicle sales in SA show an encouraging recovery
Motus announced a 78% improvement in operating profit to just under 3.8 billion rand, from 2.1 billion rand in 2020. It achieved an operating profit of 3.62 billion rand. rand in 2019.
Revenue increased 19% to R87.2 billion, from R73.4 billion – and stood at R79.7 billion in 2019.
Net earnings per share rose 298% to 1,179 cents from 296 cents – and 1,009 cents in 2019.
Arbee said that the “excellent business results” led the board of directors to approve a total dividend for the year of 415 cents per share, of which 1.60 rand has been paid and another 2.55 rand will be paid out. ‘by the end of September.
Motus did not declare a dividend in 2020.
Arbee said that Motus is committed to delivering stable operational and financial results through June 2022. However, he underscored a caveat to this commitment that there must no longer be strict lockdowns and that the shortage of vehicle stocks must not deteriorate.
Motus shares rose 1.8% on Wednesday to close at R94.20.
Motus’ double-digit revenue growth was reflected by Super Group, a JSE-listed transport and mobility company, which earlier this week announced a strong recovery in the performance of its car dealership operations in South Africa and UK.
Super Group CEO Peter Mountford said his dealers in South Africa had increased revenues by 19.4% to R8.2 billion in the year through the end of June.
He attributes this in large part to a sharp increase in the average selling price of vehicles and a 15.7% improvement in used vehicle sales volumes compared to a 13.9% decline the previous year.
The parts and service business exceeded expectations despite the impact of service and repair delays, particularly in the one-year period after the first hard Covid-19 lockdown, he said.
Mountford noted that the group’s South African dealership operations increased new vehicle sales by 7% in the year compared to a 20.5% decline in the previous year.
The operating profit of the Super Group concession business increased by more than 85% to R 272.3 million.
The group reported a strong rebound in its overall financial performance during the year. Revenue increased 14.3% to 39.5 billion rand from 34.6 billion rand. Operating profit improved 44% to 2.27 billion rand from 1.57 billion rand.
Listen to Simon Brown’s MoneywebNOW podcast interview with Arbee (or read the transcript here):