CAR Group set to prosper after Australian automotive market sets all-time sales record in 2023

About CAR Group Limited

CAR Group Limited (ASX: CAR, Carsales, or the Group) is one of the largest digital marketplace businesses in the world employing more than 1800 people globally, with 750 of those based in Australia. More than 50 percent of the Group’s revenue is derived from outside of Australia, including the US, South Korea, Brazil, and Chile. The Company also operates several websites in non-automotive verticals like caravans, boats, trucks and heavy machinery. CAR’s services are provided to dealers, consumers, manufacturers, and financiers, and include classified advertising for private and dealer customers to advertise automotive and non-automotive goods and services for sale.

Australian automotive market sets all-time sales record in 2023

The Australian automotive market achieved 1,216,780 new vehicle sales in 2023, an all-time record. The previous highest sales result was 1,189,116 new vehicles in 2017. The 2023 sales volume was about 12 percent up on 2022 and reflects a significant recovery since the arrival of Covid-19 in 2020 when new vehicle sales declined to 880,000. Prior to Covid-19 new vehicle sales were remarkably consistent at about 1,137,000 sales on average per annum between 2012 and 2019.

Looking Ahead

CAR’s future growth prospects are highly favourable given the growth potential of its overseas markets and the resilience of the Australian vehicle market despite cost-of-living pressures and increased interest rates. The Group’s results for the half-year to 31 December 2023 will be released on 12 February 2024.

Accelerated digitisation in the automotive industry and changes in consumer behaviour are creating fresh growth opportunities for CAR, by bringing more of the car buying and selling process online, assisting dealer customers to bring a digital retailing capability to their sales process. Consumers are responding positively to the omni-channel sales experience where new car buyers can choose between a physical show room or go on-line to view the car of their choice. New vehicle retailers are leveraging both their physical and digital assets to make sales, and this is supporting CAR’s revenue growth. Online advertising from Dealer groups accounts for half of CAR’s Australian revenue and Australian revenue accounts for about half of total Group revenue. However overseas revenue is the future growth focus for the Group.

CAR’s global markets have a combined population of 750 million people and car sales volumes of approximately 25 million per annum. The Group’s international growth strategy is to focus on countries that have digital maturity and favourable strong macroeconomic attractiveness to enable it to leverage its world-class technology and intellectual property.

CAR is strongly positioned for both domestic and international long-term revenue and earnings growth. CAR’s proprietary Intellectual Property and its recent overseas acquisitions, most notably 100 percent of Trader Interactive in the US and its increased stake of 70 percent in the leading automotive digital marketplace in Brazil, Webmotors, have been successfully integrated into the Group.

The other positive factor working in favour of CAR shareholders is the potential for lower interest rates in 2025 to support higher share valuations, especially for highly cash generative growth stocks like CAR. Lower interest rates mean that discounted valuations based on a lower discount rate used for cash flow valuation result in higher theoretical valuations. These factors are likely to support shareholder value accretion over the medium term.