WeBuyCars' billion-rand bet: Strong earnings, rapid expansion, market risks

Daily Maverick

20-05-2025

The recently listed vehicle retailer posted R508-million in core headline earnings, declared its second dividend and expanded its national footprint – but as interest rates rise and political uncertainty deepens, is this growth model more fragile than it looks?
From niche operator to market juggernaut in fewer than five years, WeBuyCars now commands the country's most-visited car retail platform. Just more than a year since its listing on the JSE on 11 April 2024, the company has scaled rapidly. The unbundling from Transaction Capital laid the groundwork for this growth spurt, allowing the group to execute a focused expansion and technology strategy.
But beneath the billion-rand milestones, cracks are beginning to show – in cash flow, inventory movement and capital exposure.
advertisement
Don't want to see this? Remove ads
'WeBuyCars continues to make meaningful progress towards its goal of 23,000 vehicles per month,' said CEO Faan van der Walt in a SENS announcement issued on Monday, reaffirming the company's FY2028 volume ambition. Whether that goal is still realistic remains a growing question.
Cars by the numbers
Revenue rose 15.2% to R13.13-billion. Units sold and bought both climbed over 12%. Core headline earnings hit R508.2-million, while basic earnings rebounded from a R69.5-million loss to R507-million. Core headline earnings per share, however, barely moved – up just 1.6% – diluted by the 83 million new shares issued in the company's pre-listing capital raise.
Read more: The Finance Ghost – The market lowdown on MTN, Vodacom and WeBuyCars
WeBuyCars says the dilution was a one-off pre-listing technicality. 'The share dilution was a one-off occurrence; this happened prior to the listing due to the shareholders at the time. At this point no capital was taken onto the WeBuyCars balance sheet,' chief marketing officer Rikus Blomerus said in response to questions from Daily Maverick.
advertisement
Don't want to see this? Remove ads
The board declared a 30-cent dividend, in line with its policy to return 25% to 33% of headline earnings. For most shareholders, the net payout after dividend withholding tax will amount to 24c per share. While modest, the payout underscores the company's balancing act between expansion and capital return.
WeBuyCars also recorded its best month yet in November 2024, moving 16,294 vehicles – a record the company says validates its volume strategy.
Perception vs performance – who is actually buying?
While anecdotally some perceive that WeBuyCars remains a brand many say they wouldn't buy from, this isn't supported by the data. A review of the company's HelloPeter reviews indicates an overall score of 4.34 out of five, based on more than 30,000 reviews submitted.
More than 91,000 vehicles were sold in six months. The platform draws more than eight million monthly visits and its national footprint is expanding aggressively. The disconnect between reputation and performance may be chalked up to market segmentation: the business thrives with budget-conscious, convenience-focused consumers, while its critics tend to come from higher-income demographics.
That may not matter. As the numbers show, mass-market trust is intact. But a deeper look at the balance sheet reveals the risk behind the revenue: stockpiles are growing faster than sales.
Inventory accumulation
Inventory levels surged by 30.8% to R2.78-billion, far outpacing the 13.5% growth in units sold. The average inventory value per vehicle rose 12% to R184,084, reflecting both inflation and a shift towards newer, financeable stock.
advertisement
Don't want to see this? Remove ads
advertisement
Don't want to see this? Remove ads
But the increase in inventory write-downs – from R36.3-million to R47.6-million – suggests a worrying build-up. Despite claims of nimble logistics and AI-driven pricing, some vehicles are sitting far longer than intended. Warehouse capacity has expanded to 11,902 bays, yet many of these are visibly under-rotated, raising concerns about liquidity tied up in ageing inventory.
According to automotive industry expert Edward Makwana, in an interview with Daily Maverick: 'Inventory build-up tends to occur when consumer demand softens due to factors such as rising interest rates, constrained disposable income, job losses and tightening credit conditions. Retailers often stock up in anticipation of demand that doesn't materialise.' In South Africa, he adds, this mismatch is amplified by load shedding, fuel price volatility and overly aggressive stock procurement.
Driving expansion
Since October, WeBuyCars has launched its Rustenburg supermarket, relocated and expanded Pietermaritzburg, and upgraded seven additional locations. New sites in Vereeniging, Lansdowne (Cape Town) and Montana (Pretoria North) are scheduled to open by year-end, bringing another 3,000 vehicle spaces online.
The group's footprint now spans 93 buying pods – a level of physical reach unmatched in the sector. Expansion is being funded through a mix of internal cash and debt, including R955.6-million in property mortgages. A further R453.8-million in capital spending has been committed, with major new builds under way: Lansdowne will cover 30,400m2, and Montana 17,450m2.
advertisement
Don't want to see this? Remove ads
advertisement
Don't want to see this? Remove ads
Makwana notes that while large-format used car supermarkets retain an edge in brand trust and stock variety, the market is shifting. 'The most competitive players will be those who can blend physical infrastructure with a scalable, tech-driven ecosystem, offering convenience without compromising trust.'
Cash flow pressure and capital commitments
Growth is expensive. And increasingly, it's being funded with borrowed money and shrinking cash.
Net operating cash flow rose modestly to R284.1-million, but it's not keeping pace with the R370-million already spent on capex, nor the R453.8-million still to be deployed. Cash and cash equivalents dropped from R147-million to a negative R74.1-million – a striking reversal for a company posting record earnings.
Management insists that capital deployment remains 'disciplined', but the widening gap between liquidity and infrastructure spend is hard to ignore. For a company with rising profits, its cash flow profile is unusually tight.
Digital traction, offline drag
WeBuyCars calls itself 'the simplest way to sell a car'. The digital numbers back that up: 8.7 million monthly visits, 2.6 million unique users. The group's tech stack for lead qualification and dynamic pricing continues to be a strategic asset.
advertisement
Don't want to see this? Remove ads
But it's unclear how much of that traffic is converting into actual turnover, or how well the system copes with slow-moving stock. As vehicle financing becomes tougher to access, WeBuyCars may find that clicks alone don't move cars.
WeBuyCars says technology plays a major role in both lead generation and conversion. 'Approximately 25% of our sales comes from our online auctions,' it said. 'Even when sales aren't fully online, consumers use technology to make more informed decisions. Our sales-to-leads ratio has improved significantly over the past year.'
Headwinds and hazards
South African consumers remain under pressure. Real wages are flat. Credit is tighter. Disposable income is being squeezed. The GNU's post-election Budget negotiations have created policy limbo, adding uncertainty to interest rates, taxes and state support for consumer goods.
Globally, US tariff shifts and rand volatility are affecting sentiment. And with R1.33-billion in net interest-bearing debt – much of it mortgage-linked – WeBuyCars' model is increasingly sensitive to even modest rate changes.
Makwana adds that the R150,000 to R250,000 price band – a key segment for WeBuyCars – is particularly financing-dependent. 'Recent interest rate hikes and stricter lending criteria have significantly impacted buyer affordability. Dealers need to offer flexible finance and insurance solutions to maintain volumes in this segment.'
He also warns of structural warning signs for auto retailers: 'Sustained negative free cash flow, ageing stock, underutilised space and an over-reliance on stock turnover over customer experience – these are all red flags.'
WeBuyCars' next gear
The company's outlook remains bullish: more sites, more stock, more sales. Its strategy hinges on keeping margins intact while scaling – a delicate balance in today's economy.
Urban saturation is becoming a real risk, particularly in Gauteng. If volumes flatten while infrastructure grows, the model could be tested. That would shift the conversation from scale to selectivity, from speed to sustainability.
But the company says it makes expansion decisions based on rigorous local analysis. 'We closely track market share and consumer behaviour in each area before we make any large investments. We have a lot of data available that gives us great consumer insights in each area,' Blomerus said.
'The evolving political landscape may introduce short-term complexity, but also opportunity,' Van der Walt told investors.
As Makwana concludes: 'With R13.1-billion in revenue and over R500-million in core earnings, WeBuyCars clearly retains market momentum. Their consumer reach and trust levels are outperforming traditional dealerships. But future competitiveness will depend on how well they match scale with agility.'
If demand softens or capital tightens, the group may find itself parked in the slow lane. DM