CAR Group Limited (ASX: CAR): Resilient Earnings & Global Growth

About Car Group Limited

CAR Group Limited (CAR Group, ASX: CAR, formerly Carsales.com Limited) which is headquartered in Melbourne, was established in 1996, before listing on the ASX in 2009. Today the Group operates in Australia, Oceania, Asia, and The Americas. Its digital vehicle marketplace portfolio includes carsales (Australia), Encar (South Korea), Trader Interactive (US), and chileautos (Chile). Additionally, CAR Group holds a majority stake in webmotors (Brazil).

Highly resilient and countercyclical earnings model

CAR Group’s market positioning is heavily geared toward used vehicle buy and sell transactions which have less cyclicality than new vehicle buy transactions. This is especially the case during periods of sluggish consumer demand and high interest rates.

Furthermore, Car Dealers have a greater need to move inventory when interest rates are high because of the higher holding costs associated with slow-moving stock sitting in the car yard or on the show room floor. CAR Group Accordingly, the current economic and trading conditions imply that CAR Group’s earnings are likely to remain resilient because its capital-light digital vehicle marketplace business model delivers superior returns on investment versus traditional advertising source business models. This is especially the case for the subscription model for dealers in the US and South Korea which results in high recurring levels of revenue.

In addition, CAR Group’s low-cost base and high margin model and low working capital requirements provide greater operational flexibility compared to traditional models, which means it is less affected during major economic slowdowns. CAR Group’s geographical diversity provides further earnings resilience.

High margin business model readily transferable to international markets

CAR Group’s high margin business model generates strong free cash flows that support investment in new growth initiatives. This includes rapid deployment of strategic products in all international markets contested where then Group’s transferable and scalable Intellectual Property and technology platform can be readily implemented. This is particularly relevant to future earnings given CAR Group is underpenetrated in international markets where digital advertising spend is lower, leaving significant runway to grow through organic growth.

Positive FY25 outlook in all geographic markets

Following a positive FY25 outlook statement on the back of a solid first four months of the 2025 financial year, the business continues to perform well across all financial metrics, including revenue, EBITDA margins and net profit after tax and in all contested geographic markets.

In Australia, strong growth in Dealer revenue is being supported by growth in lead volumes, depth, and yield, while in Private, growth is being driven dynamic pricing optimisation and Instant Offer growth. In Media, continued expansion of CAR Group’s native ad products, programmatic capability and non-automotive diversification is also augmenting earnings growth.

In North America, the Group is achieving excellent growth supported by new customer acquisition, increased adoption of depth products, dynamic pricing, and new media technology. In Latin America CAR Group is experiencing outstanding webmotors growth delivered via national expansion, new products and media technology and an uplift in finance transactions. Asia is delivering consistent double-digit growth underpinned by opening new Guarantee Inspection sites and better branch utilisation. Encar (South Korea) also continues to scale while growth in tyres and inspection revenue are also positive.

Clear leadership in all contested geographic markets is generating strong network effects, further building competitive advantage, and delivering strong cash flow and earnings growth. Strong cash flow with CAR Group’s robust balance sheet provides for consistent dividends that should ensure ongoing shareholder value accretion over the long-term.