Current economic conditions are forcing South African consumers to buy down when it comes to vehicle purchases, moving either to pre-owned, entry-level or smaller cars, says Motus CEO Osman Arbee.

Motus operates across the automotive value chain through four business segments, namely import and distribution; retail and rental; motor-related financial services, and aftermarket parts.

Speaking in Johannesburg on Wednesday as he announced the company’s results for the year ended June 30, Arbee said Motus recorded an 11% increase in revenue from used vehicles, with revenue from new vehicles dropping by 2%.

Arbee considered the buying-down trend as advantageous to Motus, as consumers were moving out of premium cars into the vehicles imported by Motus, such as Hyundai, Kia and Renault.

“We are in the right game. If we were in premium, we would be in trouble.”

Premium car makers include BMW, Audi, Jaguar and Mercedes-Benz.

Arbee said Motus had more than 350 dealers, of which two were BMW dealers and five Audi dealers. Mercedes-Benz operated on an agency basis, which meant dealers did not have to own the vehicle stock.

Arbee emphasised that Motus’ exposure to the premium sector would not “pull the whole group down”.

He said Motus was, in fact, in a position to benefit from the premium sector to some degree, as South Africa had a big premium car parc that required maintenance and care.

The buying-down trend was also visible in the company’s aftermarket business, noted Arbee.

As the economy continues to bite, consumers are looking for cheaper parts, which means less profit margin on some aftermarket parts. It also requires Motus to stock not one line of air filter or spark plug, for example, but three or four, in order to cater for tighter budgets.

This in, in turn, requires larger stockholding by the company, with Motus now expanding its distribution centre network around the country, as well as in China.

“We need to make sure we are closer to the customer, that we are agile . . . and that we can move faster,” noted Arbee.

It was not only the South African economy that was suffering, he added. Motus’ two other primary markets – the UK and Australia – also faced some growth challenges. In the UK this was linked to Brexit and in Australia to the housing market.

However, Arbee expected both these markets to improve before South Africa, with South Africa “scoring a lot of own goals” as it stumbled towards recovery.

Arbee said Motus was looking at some bolt-on dealership acquisitions in Australia and the UK. Doing so in the UK would be harder though, as the company already had 119 dealerships in the UK, but only 28 in Australia.

Motus on Wednesday reported a 3.5% increase in revenue for the year ended June 30, to R79.7-billion, compared with the previous financial year.

Operating profit was up 1%, to R3.6-billion.

The import and distribution business was responsible for 21% of Motus group revenue and 21% of operating profit, with the retail and rental business at 70% of revenue and 41% of profit. Motor-related financial services accounted for 2% of revenue and 25% of profit, with aftermarket parts at 7% of revenue and 13% of group operating profit.

Motus earned around 33% of its revenue from outside South Africa, as well as 10% of its operating profit.