An early bet on the SA retail car sector is paying off handsomely for black economic empowerment (BEE) group Peu.

The group bought 50,1% of car dealership owner Lazarus Motors in 1999, years before everyone began raving about the market's potential.

The investment has grown on the back of rocketing national car sales.

According to the National Association of Automobile Manufacturers of SA (Naamsa), 2005 was a record year for the SA new vehicle manufacturing industry - both domestic sales and production figures were at record highs.

Naamsa's 2005 total sales showed a 25,7% increase to 565 018. In 2004 Naamsa reported a 22% increase in sales to 449 603 vehicles compared with 368 470 in 2003.

In July this year, despite the recent interest rate increase, 37 376 new cars were sold. Naamsa says the July figures represented the best sales monthly performance on record - an improvement of 6 443 new cars, or 20,8%, on the 30 933 new cars sold during July 2005.

Buoyant economic conditions and the emergence of a black middle class have fuelled the surge in car sales and businesses such as Lazarus Motors have benefited enormously.

The Pretoria-based operation operates four dealerships - Ford, Mazda, Land Rover and Jaguar - under one roof.

According to operation head Colin Lazarus, the dealerships produce combined annual sales of 4 700 cars a year. The figure is made up of 3 500 new cars and 1 200 used cars.

The business also has a service division and a parts supplying division.

Black buyers account for up to 70% of sales at the Jaguar dealership and 60% at the Land Rover dealership.

"We saw many people before deciding to sell the stake to Peu," says Lazarus. "No-one caught my attention like [MD] Peter [Malungani] did," he says.

"Our approach to buying into existing businesses is driven by our ability to add value to them," says Malungani.

Peu assisted Lazarus Motors in securing the Eskom fleet contract for 2003, 2004 and 2005.