Motus takes full control of Renault SA

Local group buys out the remaining 40% of distributorship for R250m.
Under more independent management now. Image: Supplied

JSE-listed automotive group Motus has acquired the remaining 40% shareholding in Renault South Africa it did not own from Renault France in a transaction valued at R250 million.

The Competition Tribunal last week unconditionally approved the transaction.

The tribunal said the shares in Renault SA were held by Renault France and Motus Car Imports, a wholly owned subsidiary of Motus, and post-merger Motus will wholly own and control Renault SA.

Done deal

Renault SA is the distributor of Renault cars in Southern Africa.

Motus CEO Osman Arbee confirmed that Motus owned 60% of Renault SA prior to the transaction and Renault France has for the first time given Motus an exclusive 10-year distribution agreement.

Arbee said the distribution agreement had to be renewed every five years when Motus only had majority control of Renault SA.

Commenting on the rationale for the transaction, Arbee said it is very difficult “when you are dealing with a factory as your shareholder”.

“Their objective is to keep their factory busy and your objective is to be a profitable business. So our objectives were not aligned,” he said.

Arbee added that Renault is active on the global market and did not allow Motus to take foreign exchange forward cover, which allows Motus to sell cars with certainty about all the input costs.

Run like the others 

He said Motus informed Renault it could not run the business like this and that it wanted to run it the way it managed Hyundai and Kia in South Africa where Motus has full control.

Arbee said Renault France has a new CEO and he decided the group should move out of the smaller regions, resulting in Renault’s exit from both SA and Australia.

Renault current CEO is Luca de Meo, who took up the reins of the French car manufacturer in July 2020.

“We were very fortunate that he [De Meo] thought like us and gave them the approval, which is why we signed the deal,” said Arbee.

He added that the benefits to Motus of being in full control of Renault SA relate largely to operational issues.

He said Motus is now able to take forward cover and can therefore plan its sales for the next six months while also being able to sell Renault’s to the car rental industry “because I know what my cost base is”.

Arbee said previously he would not have known this until he had paid for the car, which meant Motus struggled to conclude car rental deals because its costing was unclear.

Free rein

He said Motus also had to watch its cost base when Renault France owned a stake in Renault South Africa “because I had another shareholder”.

Arbee said Renault France wanted Motus to operate an independent Renault warehouse and the group can now start sharing warehouses and parts distribution facilities.

“I can also open and close dealerships where I want to,” he said.

Arbee said Corné Venter, CEO of Motus Retail and Rental, is now running all the dealerships whereas previously six dealerships were run by the importers and the balance were run by independents.

He said Motus can now manage more dealerships, decide on Renault’s dealership footprint, and does not require permission anymore in managing the business.

Arbee said Motus will also get synergies from wholly-owning Renault SA, including operational, dealerships, parts distribution and foreign synergies.

Attractive entry level vehicles

He said there are a total of 81 Renault dealerships in South Africa, of which 25 are owned by Motus, and Motus is very positive about Renault’s sales prospects in South Africa because the brand has several attractive entry level vehicles.

This includes the Kwid, which is one of the better entry level passenger vehicles, the very popular and well-priced sport utility vehicle (SUV) called the Triber, apart from the Sandero, Duster and Kadjar, he said.

“Renault is not playing in the premium car market but very well in the entry level and small SUV market, which is the bread and butter vehicles we are selling at the moment,” he said.

Arbee said Motus is comfortable with the sales targets for 2021 set by Renault France, adding “it’s nothing that we are worried about”.

He said Renault currently has an about 4% share of the passenger car market in South Africa and Motus would like to grow it to 5% by the end of 2022.

Sales figures released by automotive council Naamsa show that Renault sales in South Africa declined by 30.7% to 4 254 cars in the first three months of 2021 compared to the 6 139 cars sold in the first quarter of 2020.

Arbee said sales figures in 2020 were inflated by sales to car rental companies and there is now less demand from the car rental industry.

This is a result of the impact of the Covid-19 lockdowns on the travel, tourism and hospitality industries.

Arbee said although sales to the car rental industry were lower in the first quarter of 2021, dealer sales in this quarter “were not down”.

Shares in Motus dropped by 1.7% on Wednesday to close at R92.50.

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I’m somewhat confused Mr. Arbee. First, you state that Renault could not sell to car rental companies (because of unknown cost base linked to no forward cover). Therafter, you state that sales in the first quarter of 202 was higher because of volumes into the car rental companies… Was your background in used car sales?

End of comments.

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