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South Africa’s vehicle market is on track for its strongest performance in more than a decade, providing a boost to automotive group Motus as it forecasts high-teens growth in attributable profit for its financial year to end-June.Speaking during a pre-close business update on Thursday, Motus CEO Ockert Janse van Rensburg said South African operations are expected to outperform the prior year, offsetting weaker trading conditions in its international businesses in the UK and Australia.The company expects attributable profit to increase by the high teens for the full year, supported by stronger trading and a reduction in financing costs.The CEO said the local vehicle market is expected to recover to levels last seen in about 2015.“I think when I started in 2015 in the automotive world, that was the last time we’ve been over 600,000 units, and we’ll be back there again,” he said.(Dorothy Kgosi) The group expects South Africa’s new vehicle market to end this calendar year on sales of 610,000-640,000 units.According to Van Rensburg, growth in vehicle sales has been supported by low vehicle price inflation, lower interest rates, pent-up demand and increased competition from new entrants offering more affordable vehicles.He said consumers have benefited recently from relatively stable vehicle prices.“The reality is that consumers are probably in a really fortunate position, as prices have not really gone up for two years,” he said.The recovery in the vehicle market comes despite continued pressure on household finances and broader economic challenges.Motus said South Africa remains the largest contributor to group earnings, accounting for about two-thirds of profitability, while the UK and Australia contribute the rest.The CEO said the emergence of Chinese and Indian vehicle manufacturers continues to reshape the local vehicle landscape. Motus has expanded its representation to include a growing number of new options and now represents 40 vehicle brands in South Africa, including all of the country’s top 20 brands.One of the newest additions, Tata, has gained traction since its launch through Motus’ distribution business last year. The company said Tata is selling more than 500 vehicles a month and has achieved about 1% market share.The stronger new vehicle market has also supported other parts of the group’s operations.Motus reported growth of about 5% in preowned vehicle volumes despite pressure from affordable new vehicle offerings. Vehicle rental operations continued to perform strongly, recording utilisation of 74% in March, close to the upper end of the company’s target range.Its mobility solutions business also benefited from higher vehicle sales, while the South African aftermarket parts division exceeded expectations through higher activity levels and growth in the informal repair market.Internationally, conditions remain more challenging.Van Rensburg said operating profit from international operations is expected to be marginally lower than the previous year due to difficult economic conditions in the UK and margin pressure in Australia.In the UK, passenger vehicle sales have remained resilient, but commercial vehicle demand has been affected by delays in fleet purchases. The company also cited persistent inflation, subdued business confidence and higher labour costs.Yet, he said Motus’ diversified business model helped support earnings and cash generation.The group has continued to reduce debt, with net debt to earnings expected to improve to about 1.3 times by year-end, down from levels above two times 18 months ago. It also repurchased about 4-million shares in the year and indicated that its dividend payout is likely to move closer to the upper end of its 35%-40% payout range.Van Rensburg said the group’s broad exposure across the vehicle value chain strengthened its resilience.“I believe the group’s diversification has been able to transition us into a bit more of that sleep-easy and base-to-base business that we’ve been asking for,” he said.Motus is scheduled to release its full-year results in September.The company’s share price gained the most since early November, up 5.57% to R107.10.
