“However, the current temporary excess of demand over supply has, for some, created the [wrong] perception that economic recovery has created the excess,” he said when commenting on CMH’s financial results for the six months to August 2021.

McIntosh added that the shortage of new vehicle stock is expected to lessen towards the end of 2021 and the start of the new year.

He highlighted that COVID-19-related factory closures internationally have caused disruptions in the component supply chains, principally from China and India, but the resultant new vehicle stock shortages have 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.

“The parts and service departments have performed well compared to the depressed prior period.

“However, after the surge in demand, which followed last year’s lockdown, revenue levels have flattened in line with both constrained economic activity and lower distances travelled, as many employees have opted, and been encouraged, to work from home,” he said.

CMH reported that the 54% increase in revenue in the group’s motor retail division, improved trading margin, slashed operating expenses and lower interest rates have driven the segment's return from a pre-tax loss last year to its best-ever first six months results.

McIntosh said First Car Rental, the group’s car hire division, has achieved a remarkable recovery from the depths of despair experienced during the first half of 2020 when the fleet size and staff complement were sensibly optimised last year “without panic or overkill”.

He said there has been a steady increase in both revenue and daily hire margins since then, with the exclusive arrangement with Safair, the most reliable airline during these troubled times, and the high-volume contracts secured in respect of the insurance replacement market, having helped to increase market share.

But McIntosh 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 has recently secured the supply of a batch of new vehicles that will ease the pressure and those fleet vehicles that have been rotated have realised favourable sales prices.

“Good news recently released is the lifting of travel restrictions to South Africa by European and United Kingdom countries. The positive impact on the whole travel and hospitality industry over the festive season and beyond will be enormous,” he said.

McIntosh added that the total value of borrowings in respect of the car hire fleet has reduced from R579 million to the current R486 million, despite the fleet book value remaining substantially unchanged.

This was attributed to group cash resources having been used to settle due debt.

“The related vehicles have not yet been sold as the national new vehicle shortage has meant that they have not been able to be replaced,” he said.

CMH said the banks, which manage the group’s finance joint ventures, reported an improved economic outlook in June 2021 and advised that conservative doubtful debt provisioning last year will be eased over the next 12 months.

The group reported that revenue, trading margins, operating expenses and net interest costs all improved in the six-month reporting period compared to the corresponding period in 2020.

It said these factors have combined to produce headline earnings of 200 cents per share, up 1 529% on the negative 14 cents last year - and 65% on the positive 121 cents achieved in 2019.

Group revenue grew by 55% year-on-year to R5.5 billion and operating profit increased 426.5% to R256.1 million.