The share has fallen 35% this year amid pressure from competitively priced new cars, tighter margins and rising interest costs.
WeBuyCars was an immediate favourite with investors when it listed in April 2024, with the share price increasing from around R20 on its listing date to a high of R60 at the beginning of July 2025.
Unfortunately it has been downhill from there.
The share price has declined to R30, chalking up a loss of 35% since the start of 2026.
To be fair, the overall market did not fare too well either; the JSE All Share index is some 7% lower than in January, and the share prices of several other local companies show similar – if not bigger – declines.
There seem to be several fundamental reasons for the poor performance of the WeBuyCars share price.
The motor industry, commentators and WeBuyCars itself regularly mention the new and growing competition from Chinese cars as one of the main reasons.
The quality of Chinese vehicles has improved over the past decade and prices have remained competitive, leading to greater acceptance of Chinese vehicles by SA motorists.
Meyrick Barker, portfolio manager at Camissa Asset Management, says a big issue for WeBuyCars is the decline in used car prices caused by the rapid growth of competitively priced Asian brands.
“This has been good for consumers, but has reduced the profit WeBuyCars earns on some vehicles and, in some cases, has resulted in cars being sold at a loss,” says Barker.
Camissa Asset Management will have its eye closely on WeBuyCars as the fund manager recently increased its shareholding in the largest used car retailer in SA to above 5%, according to an announcement by WeBuyCars.
Another announcement stated that Allan Gray also increased their stake in the company to above 5%, on behalf of their clients.
Barker says another reason for the decline in profitability – and by extension the drop in the share price – is that WeBuyCars reported lower earnings due to a sharp increase in interest costs.
“WeBuyCars has invested heavily in growth, opening three new supermarkets [branches]. These sites incur costs before reaching normal sales levels, while the expansion has required additional debt to fund properties and vehicle stock, increasing interest costs,” he says.
“As the new supermarkets mature, sales should grow faster than the associated costs, and a denser national footprint should reduce the cost of transporting vehicles between regions.”
The results for the six months to end March 2025 disclosed that new interest-bearing debt increased by 56% to R2 billion at the end of March from R1.3 billion a year ago. The net interest paid increased to R70 million for the six months compared to R50 million in the comparative period.
Management noted in their commentary to the results that stock levels increased, by around 20% over the year, to put cars on the floors of the three big new warehouses the company opened recently.
The value of inventory increased by R500 million.
Management says sales volumes surpassed 15 500 units in four of the last six months, culminating in an all-time monthly sales record of 17 209 units in March 2026. In January 2026, the group delivered an all-time buying record of 17 617 vehicles.
“These recent milestones demonstrate the growing scale, reach and operational capacity of the group and reinforce the group’s growth momentum,” CEO Faan van der Walt notes in his commentary to the results.
“Pleasingly, this volume increase translated into an improvement in the group’s market share in the second quarter of the six month period. The performance follows a continued challenging and deflationary trading environment, in strong contrast to the buoyant trading conditions experienced in the prior period.”
Van der Walt says the current trading environment is impacted by the growth in the new vehicle market (increasing nearly 16% in the 2025 calendar year), aided by the aggressive rise of competitively priced Asian brands.
“This has significantly influenced consumer behaviour and heightened competition, with these brands capturing notable new vehicle market share through attractive pricing and compelling finance offerings,” he adds.
“Traditional manufacturers, in an attempt to regain lost ground, responded in kind further – intensifying price competition and compressing the value differential that has historically made used vehicles a more attractive choice for many South African consumers.
“The current strength of the new vehicle market in South Africa continues to place pressure on margins across the used vehicle sector. Used vehicle prices experienced deflation in the six month period,” he says.
“To maintain liquidity and ensure healthy inventory turns, the selling prices of the group’s inventories, particularly those competing with the Asian brands and the competitively priced new vehicles were adjusted downwards, a proactive and necessary response, but one that placed further pressure on the group’s margins.”
WeBuyCars says that notwithstanding the current trading environment, the group continues to expand its footprint and grow its market share in line with planned growth aspirations.
“Management believes that whilst these market dynamics place pressure on the group in the short term, the buoyant new vehicle market and the growing penetration of Asian brands are expected to be positive in the medium-term for WeBuyCars. These vehicles will enter the used vehicle market in due course.
“This will expand the group’s acquisition base and opportunity set.
“The current challenging trading conditions have not impacted the group’s medium- to long-term growth aspirations,” according to Van der Walt.
The fund managers at Camissa concur. “The near-term environment remains difficult, but we believe the business remains well positioned,” says Barker.
“Strong new car sales increase the number of vehicles on South African roads, which should ultimately expand the pool of used cars available to WeBuyCars.
“Its scale, data and ability to adjust what it buys as consumer preferences change are important advantages.
“Further growth should come from increased sales of insurance and financing products, better vehicle assessment through Inspectify, and GoBid providing another route to sell vehicles unsuitable for the normal retail channel,” says Barker.
However, a few financial ratios show that the very optimistic WeBuyCars growth story has paled somewhat.
Return on equity decreased to 30% (against 47% a year ago) and inventory turnover increased from 28.9 days to 33.2 days.
Statistics from Profile Data disclose that the share is currently on a price-earnings ratio of nearly 14 times, with a forward ratio of 12 times.
This article was republished from Moneyweb. Read the original here.
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