Over the last 12 months, CAR Group Ltd (ASX: CAR) has seen its share price fall by over 30%. From cost-of-living pressures to emerging fears about generative AI, the online vehicle marketplace is facing some significant headwinds.
However, it delivered solid H126 results last week and is a company that has shown it can evolve. Here's what's happening and why I believe there is significant upside right now.
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What is driving the CAR Group share price down?
CAR Group runs online vehicle marketplaces in Australia, South Korea, the USA, and Chile. It is also a majority shareholder in the Brazil-based webmotors. While it continued to deliver solid results in FY25 despite rising cost of living in its biggest markets, investors have remained cautious heading into 2026.
Partly, this is due to broader weak sentiment across the tech sector. Investor appetite for high-growth stocks has eased, amidst fears of overvaluation. In addition, the potential for a softening of the vehicle market and the easing of used car prices this year may be contributing to investor concerns.
But perhaps its biggest headwind is the fear that generative AI will soon replace online marketplaces. Generative AI is disrupting the established 'search and browse' model, and some investors are concerned that CAR Group will lose its footing as customers lean into personalised AI-driven shopping experiences.
Can CAR Group effectively respond to the growing threat of generative AI?
For me, it can.
Firstly, I believe vehicle sales will be insulated from the shift for longer than some other consumer products, due to the high cost and level of trust required in the transaction.
Secondly, CAR Group has a solid track record of responding to major shifts.
In the 1990s, CAR Group (then known as Carsales.com) transformed the way Australians bought and sold cars with its digital marketplace, accelerating the shift from print classifieds. By the early 2000s, it was widely considered Australia's go-to online car marketplace.
Over its history, it has, by and large, demonstrated that it is an early mover, scales responsibly, and uses acquisitions to increase depth and complement its core business.
Notably, across the 2010s, it made a significant and successful move from a listing site to a sophisticated automotive marketplace, integrating a broad range of value-added services, including vehicle inspections, dealer analytics, and financing.
Now, with generative AI threatening another major shift, I believe it will once again respond with agility and discipline. It has shown that it is facing the challenge head-on by establishing a global AI hub.
Of the move, Managing Director and CEO, William Elliott, said:
We see AI as a critical enabler and we are embedding it into our products, platforms and operations. This capability will be further accelerated by the establishment of CG/lab, our global AI hub in Brazil, which is focused on developing core agentic technology that can be built once and scaled across the Group. Recent highlights include the introduction of voice-controlled vehicle search and AI companions that help guide consumers through the vehicle buying and selling journey.
And while it navigates this AI shift, CAR Group will likely still have the network effect on its side for some time. Buyers, sellers, and dealers alike are accustomed to using its sites, meaning each will go there to find the others. Obviously, that can and will change if CAR Group doesn't step up. But for me, it has an established history of success in evolving to meet its contemporary customers.
Of course, sceptics remain. But I'm still bullish on CAR Group because I believe it is making all the right moves in the present climate, supported by a consistent track record. For me, current prices present an attractive entry point for long-term investors who share my faith that it can once again evolve as AI disruption looms.
