Second-hand vehicle trading platform WeBuyCars was viewed as a growth stock not so long ago, with the market happy to pay an earnings multiple of around 20 times for a business that seemed to have plenty of road ahead. But over the past year that perception, and the associated rating, has hit a pothole.
The share price weakness this year, down about 25%, reflects pressure on two of WeBuyCars’ most important profit drivers: trading margin and inventory days. Trading margin — the gross profit earned on vehicle sales after deducting the cost of vehicles sold — has fallen from about 14.2% in the prior interim period to 12.5%. Inventory days, which measure how long vehicles sit in stock before being sold, have also moved the wrong way, rising from 28.9 days to 33.2 days. In short, WeBuyCars is earning less gross profit on each rand of vehicle sales, while stock is taking longer to move through the system.
The spanner in the works has been South Africa’s revitalised new-vehicle market, where cheap new Asian brands have driven double-digit volume growth. The pressure is most acute in the entry-level and lower-mid market, where consumers can now buy a new vehicle from around R200,000, with a warranty and attractive financing attached. That makes the case for buying second-hand less compelling.
After an initial adjustment period, when WeBuyCars had to cut selling prices to keep stock moving, management has shifted its focus to more affordable vehicles priced between R50,000 and R150,000. These sit below the price point of new entry-level models and should appeal to buyers who either cannot afford a new car or would rather buy a larger, more premium used vehicle for less.
So far, new-vehicle deflation has not dragged down WeBuyCars’ average selling price. In fact, it has risen from roughly R141,000 to about R148,000. But it would be a headwind if that changed. At the lower end, gross profit per unit is typically smaller in absolute rand terms, even if the margin is good in percentage terms. Finance and insurance commissions are also lower, as they are linked to vehicle value. That highlights the challenge facing WeBuyCars. If cheaper Chinese vehicles eventually carry low resale values — not because of quality concerns, but because new models are available at cut-throat prices — they may not deliver the used-car boon management is hoping for.
For now, CEO Faan van der Walt remains optimistic. Chinese vehicles account for about 5% of the vehicles WeBuyCars trades. Speaking at the interim results presentation, he said: “The big influx only started in the past two years, but other brands such as Haval and GWM have been around for a decade or longer and they’ve proven themselves. These brands do keep value well because they come in at a price point that’s extremely competitive and there have been no reliability issues.”
One positive is that cheaper vehicles could drive faster stock turns
One positive is that cheaper vehicles could drive faster stock turns, thereby compensating for lower gross profit per unit, even if only partly.
WeBuyCars’ chief strategy officer Willem Klopper notes that many Chinese vehicles should still resell above the group’s current average selling price of about R148,000 when they change hands for the first time. In other words, the lower-value risk may be more of a longer-term dynamic than an immediate pressure point.
There is also an encouraging sign in the interim numbers. Trading margin improved slightly from the second half of 2025 to the first half of 2026, while inventory days stayed broadly flat. That suggests WeBuyCars may have lowered its buying prices to reflect the weaker second-hand market, recovering some margin without allowing stock days to deteriorate further.
But there is a trade-off. Lower offer prices may protect margins, but they can also make car owners less willing to sell. Some may hold on to their cars for longer. Others may use the vehicle as a trade-in deposit on a new model, especially when affordable new vehicles are increasingly available. Others may sell privately through classifieds or accept a higher offer from a competitor. This may help explain why parking bays rose 31.2%, while inventory increased only 19.7%, leaving meaningful spare capacity in the expanded footprint.
The key question is whether WeBuyCars will stay disciplined on buying prices to protect returns, or sacrifice margin to fill capacity and grow market share. The answer will determine whether today’s margin pressure is merely cyclical, or the start of a structurally lower-return era.
The macro backdrop is not especially helpful. A worsening inflation outlook could delay or reverse interest-rate relief, and higher rates are bad for big-ticket discretionary purchases such as cars. Still, the bigger threat is probably not rates, but the ongoing disruption in the new vehicle market. The new Asian entrants have forced traditional brands to respond with lower pricing of their own, which means the competitive pressure on used vehicles may intensify.
WeBuyCars remains an enviable platform. Its brand, data, buying network, logistics and national footprint are difficult to replicate. But this is not a pure digital marketplace that can scale with minimal capital. Growth requires land, buildings, parking bays, working capital and inventory funding. Every expansion drive absorbs cash before it produces the intended return. That capital intensity deserves a lower multiple than asset-light e-commerce platforms, even if it also creates a moat against competitors.
Investec has cut its exit multiple to 14, lowering its target price to R40 and retaining a Hold recommendation, despite still liking the model. That feels fair. WeBuyCars is not broken, but its value is harder to pin down in a used-car market being reshaped by affordable new vehicles. Until that uncertainty clears, the rating is unlikely to regain its former shine.
