JOHANNESBURG – The South African car market remained under significant pressure in the third quarter of 2019, with vehicle sales continuing their steady decline, despite new vehicle price increases staying under inflation for the past two years. This is according to the latest TransUnion Vehicle Pricing Index (VPI) for Q3 2019.
New vehicle price increases have remained below inflation for the past two years – the longest consecutive period since the creation of the index in 2000. Used vehicle price increases have slowed, which is indicative that the used market is also taking the strain. Despite lower price increases, the number of new vehicles financed in Q3 fell 7% compared to the same period a year ago, while the number of used vehicles financed showed a 1% increase.
The new vehicle VPI moved to 3.3% in Q3 2019 from 3.1% in Q2, while the used vehicle index moved to 1.1% from 1%. The VPI 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.
Kriben Reddy, head of Auto Information Solutions for TransUnion Africa, said the sluggish market reflected ongoing low consumer and business confidence, reiterating the weak domestic demand conditions. Although interest rates fell by 25 basis points in July, which offered consumers additional spending power, many consumers have opted to delay vehicle purchasing decisions due to the ongoing economic uncertainty.
Reddy said this would inevitably have a negative effect on the local automotive industry, which is a major contributor to South Africa’s GDP. According to NAAMSA figures, the industry contributes 6.8% to GDP (4.3% manufacturing and 2.5% retail), with total automotive revenues in 2018 of R503 billion.