Roy Cokayne

Vehicle prices had risen more slowly than other products since 2000 and at a rate lower than consumer price inflation, motor industry analyst and Econometrix director Tony Twine said last week.

Twine said his analysis of vehicle price increases was based on the list price of vehicles, but consumers and businesses could buy vehicles at cheaper prices during this period because of incentive packages offered by manufacturers.

He told a Ford Motor Company of Southern Africa breakfast last week that vehicle buyers had plenty of experience over the past decade of the weakness in the rand resulting in the price of cars escalating rapidly and had developed a honed reflex reaction of heading to vehicle showrooms while prices were still favourable.

Twine said the first experience consumers had of this was in 2002 following “the assault on the rand in 2001”, and in 2009 when the industry adjusted prices after the collapse in the value of the rand in the fourth quarter of 2008.

He said consumers acted rationally last August to the weakening in the rand by embarking on a pre-emptive buying spree that boosted vehicle sales by about 15 000 units in the last five months of the year.

However, Twine stressed vehicle prices “hardly stirred” last year on the weakness of the rand because the pressure on manufacturers to raise list prices was not as great at the end of last year as it was at the end of 2008 and in 2002.

Twine said vehicle prices did not fall as the rand strengthened again in both 2002 and 2009 and consumers and businesses last year failed to realise manufacturers had by August built up a price buffer with which to absorb exchange rate weaknesses. He said this buffer had been built up by manufacturers despite domestic costs rising and eroding it.

Jeff Nemeth, the president and chief executive of Ford SA, stressed that the consumer price index had increased by about 170 percent since 2000 and automotive price increases were in a similar range despite the steep increase in other costs, such as energy.

Twine said vehicle prices were expected to rise more quickly this year than last year but not at the same pace as in 2002 and 2009.

He said the pre-emptive vehicle buying last year was crucial to Econometrix’s outlook for vehicle sales this year.

Twine said absolute light vehicle sales usually followed the direction of gross domestic product (GDP) growth and fewer cars were sold if GDP growth was lower.

He said vehicle sales also reacted to counter interest rate changes and he anticipated interest rate hikes in the third and fourth quarter of this year.

Twine said the pre-emptive sales last year were unlikely to be repeated this year.

Econometrix therefore expected negative growth in passenger and light commercial vehicle sales this year but the next boom would begin to materialise in 2013 through to 2015 before the market flattened out again in 2016.

Most vehicle manufacturers and market analysts forecast single-digit growth in motor industry volumes for this year.