These cars are cheaper than they were a year ago

 ·31 Jul 2018

TransUnion has released its latest Vehicle Pricing Index (VPI), examining the link between the year-on-year price increases for both new and used vehicles.

The index is based on data from a selection of South Africa’s most popular passenger vehicles from 15 top-volume manufacturers.

The latest index found that lower vehicle price inflation is providing significant relief to embattled consumers, with the VPI for new and used vehicles dipping significantly to 2.6% and 2.5% in the second quarter of 2018.

This follows the 5.4% and 3.6% recorded in the same period last year. A lower VPI indicates slower pricing increases, and greater relative affordability for the consumer.

Despite this positive news, TransUnion cautioned that the industry is at a sensitive point in the cycle, with a weak rand, potentially higher interest rates and global trade wars likely to weigh on imported component costs being pushed on to consumers in the months ahead.

Head of TransUnion Auto in South Africa, Kriben Reddy said the current pricing trends are nevertheless ‘very good news’ for consumers as some car brands have managed to reduce their prices over the past 12 months.

  • The new Polo Vivo 1.4 is 3.6% less expensive than a year ago;
  • The cost of a Hyundai Grand i10 Fluid 1.2 is down 2.9%;
  • The Kia Picanto down 6.3%; and
  • The Ford Figo showing no inflation for 12 months.

Notably, TransUnion research shows that even certain luxury brands have reined in price increases.

  • The Mercedes E class has lifted only 0.9% and
  • The Volvo XC60 has shown no inflation over the past 12 months.

While the current risks to the export and component import market are high due to global trade wars, Reddy does not expect to see a major impact in the next few months. However, he cautioned that there is likely to be a lagged effect as tariff changes in certain geographies take effect over the longer term.

“The US has kicked off the process of imposing a tariff on imports and in the short term, we will see an appreciation of the rand. This will directly affect SA’s GDP growth rate,” he said.

“Those manufactures who stocked up in advance and have forward cover are well placed. “They will need to relook their export markets to export at the same volumes and remain competitive,” added Reddy.

“At a time when consumers are feeling the pinch from price increases in areas, like fuel, as the economy struggles to gain ground, these lower prices provide significant relief,” he said.

Lower input costs, CPI inflation, reduced interest rates and competitive financing structures, together with the streamlining of some product lines, are among the reasons underpinning the current pricing trends.

“These factors have offset the negative impact of fuel and VAT increases which make it ideal for consumers to enter the new vehicle market,” said Reddy.

Read: Expect a much bigger petrol price hike in September: Dawie Roodt

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