File picture: Paulo Whitaker / Reuters.
File picture: Paulo Whitaker / Reuters.

Car market struggling along in low gear despite attractive pricing

By Banela Ginindza Time of article published Jul 31, 2019

Share this article:

JOHANNESBURG - The South African car market continues to struggle, with the best performance seen in the used car sector, as financially stretched consumers increasingly opt for older cars at lower price points, according to the TransUnion SA Vehicle Pricing Index (VPI) for the second quarter of 2019.

The numbers of new and used vehicles financed have fallen 7percent and 2percent quarter-on-quarter respectively, in spite of the VPI for new and used vehicle pricing remaining below inflation, with used vehicle pricing increases at their lowest since the same quarter 2014.

The new vehicle VPI moved to 3.1percent in the quarter under review from 2.6percent in the first, while the used vehicle index fell sharply from 2.5percent to 1percent.

The index measures the relationship between the increase in vehicle pricing for new and used vehicles from a basket of passenger vehicles, which incorporates 15 top volume manufacturers. Vehicle sales data is collated from across the industry to create the index.

“There is a direct correlation between current macro-economic conditions - the country’s negative gross domestic product growth of 3.2percent for the first quarter - the lowest it’s been in the past 10 years - and the constrained new vehicle market,” said Kriben Reddy, the head of Auto for TransUnion Africa.

"The TransUnion VPI report shows the used-to-new vehicle ratio increased from 2.05 at the same time last year to 2.16 in the current quarter, which means that 2.16 used vehicles were financed for every new vehicle financed. The make-up of used vehicle sales is also shifting, with 34percent of used vehicles financed under two years old, with 6percent of those being ex-demo models - which indicates consumers are opting for older vehicles as pressure on disposable income increases

People continue to spend less on cars, with a clear shift back to vehicles under R200000 as consumers continue to feel strain on their disposable income. The percentage of cars (both new and used) being financed below R200000 is at levels last seen in the second quarter of 2013, which effectively means that consumers’ purchasing power has not changed since that time and has actually decreased in real terms.

“Overall, the South African car market had another challenging quarter, although petrol price decreases forecast in July should excite consumers’ pockets. The signs for new vehicle sales are looking stagnant going into the second half of the year as dealers push sales through guaranteed buy-back options and marketing initiatives to suit the consumers’ pocket,” said Reddy.

Reddy said while car sales were anticipated to remain under pressure for the rest of the year, there was optimism about 2020.

“Our expectations are that we will see a slight improvement in the second and third quarters which should positively impact the car market.”


Share this article: