A third of the new cars Super Group sold in South Africa over the past year carried a Chinese or Indian badge. A year earlier it was a fifth. The company published its results for the twelve months to June on Tuesday, and that shift is the most interesting thing in them.
Super Group is a logistics and mobility business that also owns dealerships, and the dealerships bring in just over half its revenue. What sits on the forecourt has changed quickly. Volumes in the emerging Chinese and Indian brands grew 91.0% over the year. The division opened 11 new dealerships across Chery, Geely, GWM, Jetour, Lepas, Omoda, Jaecoo, Mahindra and Tata, taking it to 31 outlets carrying those badges.
Cheap cars, thin margins
Cheaper cars sell on thinner margins, and the division's numbers show it. Revenue at the South African dealerships rose 12.3%, to R11.96 billion, on a fifth more new cars going out the door and a good deal more used ones. Operating profit grew at less than half that rate. The margin slipped to 3.5 cents in every rand of sales, from 3.7, which the company puts down to vehicle sales taking a bigger share of the mix.
Peter Mountford, Super Group's chief executive, told News24 the appeal is price against what you get. The cars arrive with "all the extras and technology that you could ever wish for in a motor vehicle and more", he said, with warranties behind them, and buyers have decided the quality is there. He put the South African market at around 600 000 new vehicles a year and called that a constrained consumer, noting the country was selling more than half a million a year back in 2010, 2011 and 2012.
The same thing is happening in Britain
This is not only a South African pattern. In Super Group's British dealerships, Chinese brands moved from 15.7% of new vehicle sales to 24.9%. Omoda and Jaecoo volumes more than tripled, three new Chery outlets opened, and Ford volumes went slightly backwards. That division lifted operating profit 74.5% to R216.0 million on revenue that actually fell, which is what happens when the mix improves and the cost base does not.
At group level revenue rose 6.2%, to R45.83 billion, and headline earnings per share from continuing operations rose 36.0%. The board declared a final dividend of 55 cents; last year there was no final dividend at all, only a special one.
Super Group expects the South African dealerships to keep going the same way, with more emerging brands to come. Mountford told News24 he would like to see some of those brands start assembling cars here rather than shipping them in.
