Centurion Motor Exchange Business Plan — Industry Analysis

The structure of South African used vehicle retail, sourcing channels and where dealer margin actually sits.

Section 6 of 28

Industry Analysis

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The used-car industry is mature, cash-generative and consolidating, and still growing

The industry comprises the buying, reconditioning and retailing of pre-owned light vehicles through franchised dealers, independent dealers, scale traders and private sales. It is closely linked to the new-vehicle market, which supplies trade-ins and sets reference prices, and to the banking sector, which finances most purchases and funds dealer stock.

Figure 1. 1: Used-car transactions through the AutoTrader dealer network, H1 2025 vs H1 2026

Size and growth

AutoTrader’s dealer network recorded 195,455 used-vehicle sales worth R82.4bn in the first half of 2026, growth of 8% in units and 9% in value; the average used vehicle took 37 days to sell. Annualised, that is c. 390,000 units and c. R165bn. Toyota’s own pre-owned business reported sales up 3% year to date through August 2026, and average used prices have held above 2025 levels in every month of 2026 so far. We use these dealer-network figures as the basis for market sizing because they represent the retail channel in which the Company competes.

The new-vehicle market is growing faster still: naamsa reported 372,770 new vehicles sold in the first seven months of 2026, up 12.7%, with August sales up 11.4% to 57,898 units and new-energy vehicle sales up 88%. Strong new sales are a mixed signal for used retailers, they increase the supply of quality trade-ins, but cheaper new entry-level vehicles compete directly with the lower end of the used market.

Key industry trends

Table 6.1: Trends and their implications for the Company

Trend	Evidence	Implication
Chinese and Indian brands reshape entry-level values	New vehicles now available from c. R200,000 with warranties; WeBuyCars’ trading margin fell from 14.2% to 12.5% and stock days rose from 28.9 to 33.2 in its latest interim period	Avoid over-stocking sub-R150k vehicles; model a spread 0.5pp below the historic norm; re-price weekly
Buyers trade down to compact, efficient cars	Swift and Grand i10 in the national top 10, selling in 28–29 days	Weight 30% of stock to compact hatchbacks
Bakkies remain the most liquid segment	Ford Ranger the best-selling used vehicle; Hilux and Fortuner sell in 27 days	28% bakkie mix; business-buyer channel
Digital-first discovery	AutoTrader recorded 19 million users and 212 million advert views in H1 2026	Listing quality, photography and response times are core capabilities
Higher and uncertain rates	Repo raised to 7.00% (prime 10.50%) in May 2026; June CPI 5.0%; next MPC 23 September 2026	Stress-test at +200bp; floor-plan cost treated as an operating cost
Reference-rate reform	SARB consultation (February 2026) proposes replacing prime with the policy rate as the lending reference	Facility agreements to include fallback rate language
Scale-player consolidation	WeBuyCars sold 179,006 vehicles in FY25 and targets 23,000 a month by FY28	Do not compete on price against scale; compete on assurance and service

PESTEL: affordability and credit are the forces that matter most

Table 6.2: PESTEL assessment

Factor	Assessment	Impact	Response
Political	Policy focus on local vehicle manufacturing and import tariffs; B-BBEE procurement preferences	Low–Medium	B-BBEE Level 2 target supports fleet and corporate sales
Economic	GDP growth c. 1.5%; CPI above target; prime 10.50%; fuel price increases in 2026	High	Price band and mix aligned to affordability; rate stress tests
Social	Car ownership essential given limited public transport in Gauteng; growing black middle class; trust deficit in used-car buying	High (positive)	Assurance-led proposition
Technological	Online discovery, digital valuation tools, EV and hybrid penetration rising from a low base	Medium	Invest in DMS, pricing data and listings; cautious NEV stocking
Environmental	Used oil, wash-water and tyre disposal; long-run shift to NEVs	Low–Medium	Compliant workshop; water recycling
Legal	CPA implied warranty, FAIS, FIC Act, POPIA, dealer registration	Medium	Compliance officer role; documented processes

Porter’s Five Forces: rivalry and buyer power cap margins; supplier power is low

Table 6.3: Five Forces assessment

Force	Intensity	Drivers	Strategic conclusion
Rivalry among existing competitors	High	Many independent dealers; scale traders; transparent online pricing	Differentiate on assurance, not price
Buyer power	High	Buyers compare listings instantly; low switching costs	Price within 2–3% of market; win on conversion
Supplier power	Low–Medium	Stock bought from fragmented private sellers and trade-ins; auctions and fleets are more concentrated	Diversify sourcing; buying skill is the moat
Threat of new entrants	Medium	Low barriers for informal yards; higher barriers for credible scale (capital, floor-plan, bank dealer agreements)	Staged capital and bank relationships are defensible
Threat of substitutes	Medium (rising)	Cheap new vehicles; ride-hailing; subscription and rental models	Focus above the price floor of new entry-level cars

Value chain and profitability: margin is created at purchase and in F&I

The industry’s profit pool is concentrated in two places: the buying decision, which fixes most of the trading spread, and the finance and insurance desk, whose income carries no cost of sale. Listed evidence confirms the thin overall margin: WeBuyCars has sustained an operating margin a little above 5% on a low-recon, high-volume model, equivalent to roughly R11,000 of operating profit on a R200,000 vehicle. A reconditioning retailer earns a higher gross margin but carries higher fixed costs, and a 3–4% EBITDA margin is a realistic mature outcome.

Table 6.4: Industry structure, lifecycle and key success factors

Dimension	Assessment
Lifecycle stage	Mature, with low- to mid-single-digit structural growth and cyclical swings driven by rates and new-vehicle pricing
Capital intensity	Low fixed capital (leased sites); high working capital — stock typically equals 45–60 days of cost of sales
Barriers to entry	Low for informal traders; moderate for credible retailers (floor-plan access, bank dealer agreements, brand trust, compliance)
Industry profitability	Gross margins of 10–14% on vehicles; EBITDA margins of 2–5%; returns driven by stock turn
Key success factors	Buying discipline; accurate pricing; stock turn; F&I penetration; online lead handling; reputation; working-capital access
Industry risks	Price deflation; credit tightening; fraud; stock damage and theft; key-person dependence