Major data firm sends a warning to BMW, Mercedes, and other luxury brands in South Africa

Lightstone Auto, a leading analytics firm, has warned BMW, Mercedes, and other luxury brands that South Africa’s shift from luxury to budget cars is a wake-up call.

South Africa’s automotive market is undergoing a dramatic shift as consumers increasingly move away from luxury brands like BMW and Mercedes-Benz in favour of more affordable alternatives.

Data from Lightstone Auto reveals a growing preference for budget-friendly vehicles from brands such as Suzuki and emerging Chinese manufacturers.

Paul-Roux de Kock, Lightstone’s chief analytics officer, attributes this trend to mounting economic pressures.

“Consumers are favouring mid-tier vehicles that offer features comparable to premium brands but at a more accessible price point,” explained de Kock.

He points to affordability as a key driver, underlined by the financial realities of South Africans.

The average price of light commercial and passenger vehicles in South Africa is just under R530,000.

Financing such a vehicle over five years at the current prime interest rate would require a monthly income of approximately R39,000—based on the principle that car payments should not exceed 30% of gross income.

However, this figure far exceeds the average South African salary.

According to Statistics South Africa, the country’s average wage was R27,450 per month in Q2 2024, making car ownership increasingly unattainable for many.

In response to these economic challenges, automakers and financial institutions have adopted creative strategies to make car ownership more affordable.

Extended payment terms, balloon payments, and guaranteed buyback programs have become standard offerings.

At the same time, newer brands, particularly from China and India, are disrupting the market by introducing competitively priced models.

Chinese brands such as Great Wall Motors (GWM) and Haval have quickly gained market share by focusing initially on low-cost offerings before expanding into higher-value SUVs.

De Kock notes that brands like Suzuki have capitalised on this shift, gaining significant traction in both the new and used car markets.

For instance, Suzuki has become the third-largest seller of light vehicles in South Africa, with its Swift hatchback recording a remarkable 41.1% year-on-year growth.

Luxury automakers like BMW, Mercedes-Benz, and Audi have borne the brunt of these economic shifts.

Over the past decade, their combined sales have plummeted by 63.5%, dropping from 71,889 vehicles in 2014 to just 26,202 in 2023.

Earlier this year, BMW acknowledged the impact of South Africa’s economic climate, highlighting the trend of “downgrading” among consumers who are opting for less expensive vehicles or delaying purchases altogether.

Audi similarly observed a shift, noting that consumers are now waiting seven to eight years before upgrading their cars, compared to the traditional five-year cycle.

Mercedes-Benz South Africa added that fluctuating exchange rates, rising fuel prices, and increased energy and logistics costs have compounded challenges for both consumers and manufacturers.

Another factor reshaping the market is South Africa’s reliance on vehicle imports, particularly from cost-efficient hubs like China and India.

Since 1994, the variety of vehicle options available locally has steadily grown, with Chinese brands driving the current growth cycle that began in 2020.

While these imports provide affordable options for consumers, they exert pressure on South Africa’s local automotive manufacturing sector.

“To mitigate these risks, the industry must find innovative ways to boost local production,” said de Kock.

To address these challenges, Lightstone emphasises the need for data-driven policymaking. De Kock highlights two key priorities under discussion:

1. Reducing Import Duties: Lowering excessive duties on imported vehicles could make new cars more affordable for South Africans, stimulating demand and supporting the industry.
2. Promoting Local Manufacturing: Encouraging the production of affordable electric and hybrid vehicles locally could strengthen South Africa’s position in the global market and foster sustainable growth.

Collaboration between the government and private sector is critical to achieving these goals.

Addressing infrastructure deficiencies, reducing export-related barriers, and implementing supportive policies are essential for ensuring the automotive sector’s resilience and competitiveness.

As consumer preferences evolve, South Africa’s automotive landscape is shifting toward greater affordability and diversity.

While this creates opportunities for emerging brands, it poses significant challenges for established luxury manufacturers.

Navigating these changes will require innovation, adaptability, and a concerted effort to align industry strategies with the economic realities of the South African market.

This transformation serves as both a warning and an opportunity for global and local players to rethink their approaches, ensuring they remain relevant in a rapidly changing environment.

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