WeBuyCars: Warning signs or just a bump in the road?

The much-touted growth story at tech-driven vehicle retailer WeBuyCars took a twist at the end of October when a trading statement showed the brakes had unexpectedly been applied on earnings momentum.

The share price of one of the market’s darlings began to skid, leaving investors in two minds as to whether to get in at these lower levels or look for another lift.

It’s at an intriguing juncture. But there are a few things to watch out for when looking under the hood.

First, it’s important to realise that banks seldom finance older cars. And older cars simply don’t generate the same additional revenue — such as finance commissions — that higher-value vehicles do.

With inventory levels running high in April, WeBuyCars adjusted its buying mix towards more expensive models, where these add-ons can significantly bolster margins.

But the timing proved unfortunate. Just as WeBuyCars moved upmarket, South Africa’s new car market entered its strongest upswing in a decade, propelled by a wave of aggressively priced Chinese and Indian imports. Entry-level cars with five-year warranties and attractive service bundles hit showroom floors at about R180,000 — a price point that suddenly made many used cars look less compelling. As the company notes, new vehicle registrations jumped 15.5% in the second half of its 2025 financial year, while pre-owned registrations slipped 0.3% over the same period.

The effect on WeBuyCars was material. Vehicles bought at higher price points earlier in the year had to be cleared at thinner margins as market prices adjusted downward. Core headline earnings slowed from R508m in the first half to just R430m in the second, an uncomfortable deceleration for a stock still valued at about 20 times earnings.

Effective buying is the foundation of our entire business. It drives margins, inventory health and turnover velocity

—  Faan van der Walt

Yet this is also where the WeBuyCars model showed its structural strength. The company’s data engine — fed by hundreds of thousands of daily price points across its ecosystem — allowed it to identify the trend early and pivot back into cheaper brackets before the damage became more severe. As CEO Faan van der Walt reminded investors: “Effective buying is the foundation of our entire business. It drives margins, inventory health and turnover velocity.”

That agility helped the company stay on its growth trajectory for the 2025 financial year. Units sold rose 8.4% to 179,006, with units bought increasing at a similar pace. The business averaged just under 15,000 vehicle sales a month — up from fewer than 3,000 a decade ago — with a long-term target of 23,000 a month by 2028. According to CFO Chris Rein, expanding parking capacity to more than 17,000 bays by 2027 — together with the company’s strong stock turn — should lift monthly throughput to about 22,000 vehicles, putting the 23,000 target well within reach.

The company’s “land grab strategy” continued, with 23 new buying pods added during the year and major new supermarkets opening in Rustenburg, Pietermaritzburg and Vereeniging, with Montana (Tshwane), Lansdowne (Cape Town) and eMalahleni set to follow. These megasites — some able to display more than 1,300 vehicles — form the physical backbone of WeBuyCars’ high-throughput model. Management is highly selective in its property choices, and while the company has long wanted a more material presence in Bloemfontein, it has yet to find a site that meets both its operational criteria and pricing expectations.

But it’s the technology story that increasingly defines the company’s long-term edge. Over the past few years, WeBuyCars has quietly evolved into a machine-learning-driven trading platform with a logistics network attached. The buying and pricing engine is now heavily shaped by predictive models that estimate how long a particular car will take to sell, the likely gross margin, the probability of loss, and which sales channel is most optimal.

“Price determination is one of the things that really sets us apart,” said chief digital officer Wynand Beukes. “Many factors influence vehicle prices … and our predictive models drive most of these decisions.”

The introduction of Inspectify, the company’s new in-house inspection brand, marks another major strategic step. Having relied for years on outsourced Dekra reports, WeBuyCars opted to bring the entire inspection process under its own roof, a decision reinforced by the fact that Dekra was recently acquired by Bidvest Auto. By internalising the staff, technology and workflow, the group gained full control over a function that directly influences customer trust, pricing accuracy and turnaround times.

Beukes noted that the legacy Dekra reports were “very technical”, while Inspectify is designed to be transparent, visually intuitive and far more useful to buyers. Just as important, it feeds a much richer dataset into WeBuyCars’ pricing models: “This will enable us to create a more accurate dataset once we’ve purchased the vehicle,” Beukes explained, with the rollout already covering roughly 80% of branches.

Another innovation is “WeEye”, an automated inspection tunnel equipped with 14 cameras and 800 LED lights that capture about 2,000 images of each vehicle, including the undercarriage and tyre specifications, in seconds. It’s the sort of efficiency enhancement that adds meaningful scale advantages when you process more than 180,000 vehicles a year. As management noted, if the prototype can be produced cheaply enough, “we can roll that out across the country and speed up our inspections very quickly”.

On the financing front, the partnership with Capitec is scaling rapidly, with about 700 vehicles per month now funded, fully or partially, by Capitec’s unsecured purpose-loan product. That already accounts for nearly 9% of private cash sales volumes and is likely to rise further as the two companies integrate more branches and refine the lending workflow.

For investors, the real question is whether the second-half margin squeeze is a warning sign or simply a bump in the road. Management argues that the influx of cheap new cars will ultimately expand the used car pool and, given WeBuyCars’ track record of executing through multiple cycles, the logic is hard to dismiss. Still, with the average holding period for a new car stretching to about three years, the benefits may take time to materialise.