Johannesburg - The rate of increase in vehicle prices slowed in the third quarter of this year, despite the significant depreciation in the value of the rand.
Marketing incentives offered by manufacturers in an attempt to prop up new vehicles sales has contributed to the slowdown.
The latest vehicle pricing index report released by Trans-Union Auto Information Solution last week revealed that new car inflation softened in the third quarter to 6.58 percent from 6.91 percent in the previous quarter and 7.63 percent in the first quarter.
Used car inflation also declined in the third quarter to 1.44 percent from 1.53 percent in the previous quarter and 1.67 percent in the first quarter.
Derick de Vries, the chief executive of TransUnion Auto Information Solutions, said on Friday that the index was based on data of actual transaction prices provided by vehicle dealers and financial institutions and not the list price of new vehicles.
“Without the marketing incentives, new car inflation would have been a lot different. The reality is that OEMs (original equipment manufacturers) are subsidising sales with marketing incentives and sales would decline without them,” he said.
De Vries said competition was quite fierce in the new car market and dealers had to rely on parts, after sales and workshop sales to sustain their profit margins. He said new car dealers had not been helped by the continued weakening of the rand in the third quarter, which forced manufacturers to increase new vehicle prices by more than the consumer price index.
“To stimulate sales, extra incentives are offered to consumers to buy and to mitigate the increase in pricing. If there are a lot of vehicles in the system as a result of depressed sales, price inflation will continue to decrease,” he said.
Azar Jammine, the chief economist at Econometrix, said the absolute level of vehicle inflation was still surprisingly low despite the depreciation of the rand.
However, Jammine said the biggest depreciation in the value of the rand had been against the US dollar rather than the euro, Japanese yen or other vehicle-based currencies.
“This meant the acceleration in import costs of motor vehicles had not been quite as great as one would assume from just looking at the rand dollar exchange rate,” he said.
Econometrix compiles a car vehicle price index based on the list prices.
It showed that car list prices increased year on year by 7.6 percent in the first quarter of this year to 5.9 percent in the second quarter and 3.8 percent in the third quarter.
Rudolf Mahoney, the head of brand and communications at WesBank, said marketing incentives had done a great deal to minimise the sales decline in the new vehicle market.
BUSINESS REPORT