Proudly sponsored by

Economic recovery not responsible for new vehicle demand exceeding supply – CMH

‘Return of abundant supply will expose the dearth of customers who can afford a new vehicle’, warns CEO Jebb McIntosh.
The shortage of new vehicle stock has caused used car prices to rise faster than they otherwise would have. Image: Shutterstock

The perception among some that the economic recovery is responsible for new vehicle demand temporarily exceeding supply is incorrect, warned JSE-listed vehicle retailer Combined Motor Holdings (CMH) on Tuesday.

“The reality is that national sales levels are substantially behind those of the past decade and the return of abundant supply will expose the dearth of customers who can afford a vehicle purchase. Be careful of what you wish for,” said CMH CEO Jebb McIntosh.

McIntosh however admitted that the continued low interest rates, the almost-certain surge in the tourism and hospitality industry, and the recent move to lockdown Level 1 restrictions should generate a positive macroeconomic future.

Impact of unrest

However, in a reference to the protests, violence and looting in KwaZulu-Natal and Gauteng in July, McIntosh stressed that the memory of those traumatic events and the government’s failure to institute timely accountability will negatively impact foreign investment for a lengthy period.

McIntosh said these events caused the group an estimated 12% loss in headline earnings, with August heralding an improvement in civil stability and a recovery in both confidence levels and new vehicle sales.

He added that although little physical damage to the group business was suffered in the July protests, its KwaZulu-Natal outlets were closed for a week and then suffered a slump in trading during the rest of the month.

McIntosh said the local elections in November will also be disruptive for business and, if factions turn violent, will further damage consumer confidence.

“In addition, as if the local economy is not experiencing enough challenges, another bout of load shedding has commenced,” he said.

Group’s best-ever interims

However, McIntosh reported that CMH’s retail motor segment, the group’s largest business, had achieved its best-ever first six months’ results following the pre-tax loss in this period last year.

McIntosh said this was driven by a 54% increase in revenue, improved trading margins, slashed operating expenses and lower interest rates.

CMH on Tuesday reported a 55% rise in group revenue to R5.5 billion in the six months to end-August from R3.54 billion in the corresponding period last year.

Group revenue for the reporting period was still 3.8% lower than the R5.7 billion reported for this period in 2019.

Operating profit improved by 426.5% to R256.1 million from R48.6 million and was 28% higher than the R200.06 million reported in 2019.

Headline earnings per share surged by 1 529% to 200 cents from the headline loss per share of 14 cents in the prior period and was 65% higher than 120 cents reported in 2019.

An interim dividend of 110 cents per share has been declared. An interim dividend was not declared in 2020.

Shares in CMH rose 3.42% on Tuesday to close at R26.89.

McIntosh said the improved financial performance of the motor retail segment was achieved despite overseas Covid-19-related factory closures causing disruptions in the component supply chains, principally from China and India.

Shortage of stock

He said the consequent new vehicle stock shortages have however created the opportunity to improve gross margins and increase accessory sales.

“The shortage of new vehicle stock has led to fewer sales and, consequently, fewer used vehicle trade-ins. Additionally, it has hindered the ability of car hire operators to rotate ageing fleet units. These factors have combined to produce a dearth of suitable, well-priced used vehicles.

“The result has been that used car prices have risen faster than those of new cars as the demand for high-quality stock has surged,” he said.


Parts and service

McIntosh said CMH’s parts and service departments have performed well compared with the depressed prior period although revenues have flattened following the surge in demand that followed last year’s lockdown.

He said this is in line with both constrained economic activity and lower distances travelled as many employees have opted, and been encouraged, to work from home.

Car hire

Turning to the group’s car hire segment, McIntosh said First Car Rental has achieved “a remarkable recovery from the depths of despair” experienced during the first half of 2020.

McIntosh said the fleet size and staff complement were sensibly optimised last year without panic or overkill but since then there has been a steady increase in both revenue and daily hire margins.

He said the shortage of replacement vehicles to replenish and refresh the fleet is expected to create challenges in the short term and may give rise to lost sales opportunities as inbound tourist demand surges.

However, McIntosh said the division recently secured the supply of a batch of new vehicles which will ease the pressure, while those fleet vehicles that have been rotated have realised favourable sales prices.


He said the lifting of travel restrictions to South Africa by European and United Kingdom countries is good news.

“The positive impact on the whole travel and hospitality industry over the festive season and beyond will be enormous,” he said.

McIntosh said CMH’s directors expect continuing good results by the group, adding that the shortage of new vehicle stock is expected to lessen towards the end of 2021 and the start of the new year.

Read: Global car sales plummet

Total domestic new vehicle sales for the nine months to end-September 2021 at 345 172 units are 30.1% higher than the 265 247 units sold in the corresponding period in 2020 but still 13.3% lower than the 398 290 units sold in this period in 2019.

Mikel Mabasa, CEO of automotive business council Naamsa, said in July that a full recovery in the new vehicle market will be protracted “until 2023”.

The rate of change in new vehicle sales is regarded by economists as a leading indicator of changes in economic activity.



Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in and an Insider Gold subscriber to comment.


I’d like to see the breakdown of sales. Unfortunately I have yet to see any of these articles giving us an indication of who, under these economic circumstances, have the money to purchase the cars. I suspect that the state, in all its ugly formats, make the bulk of the purchases, with private sales lagging far, far behind. Working for myself, I can confirm that I have no plans of purchasing a car, either new or second hand, but I do see a lot of new government garage cars aimlessly driving up and down the roads of our cities and towns, seemingly busy with private affairs, more so than official affairs.

Fully agree. When reading the heading “new vehicle demand exceeds supply” I thought….how come we’re all under the (mistaken?) impression that the SA economy (along with its citizens) are economically depressed.

Like yourself, and many others, we have no immediate plans to replace any of our private vehicles anytime soon. I’ve become accustomed to my current low insurance premiums *lol* 😉

End of comments.



Subscribe to our mailing list

* indicates required
Moneyweb newsletters

Instrument Details  

You do not have any portfolios, please create one here.
You do not have an alert portfolio, please create one here.

Follow us:

Search Articles:
Click a Company: