The South African car market has seen a shake-up during the country’s coronavirus lockdown as consumers and dealers face a heavily constrained environment, the latest TransUnion SA Vehicle Pricing Index (VPI) shows.
The group noted that the local motor industry was closed during April, operated at minimal capacity in May, and only resumed full operation in June.
According to the National Association of Automobile Manufacturers of South Africa (Naamsa), there’s been an annual decline of 65% in new passenger vehicle sales in Q2 2020 (vs Q2 2019), with an annual decline of almost 100% in April 2020 because of lockdown.
“With negative sentiment on the rise, the auto industry hasn’t been able to recoup sales lost in April and auto dealers are facing a difficult 2020 – as higher prices and growing financial strain take their toll on consumers,” it said.
The VPI shows that total financial agreement volumes in the new and used passenger market have dropped by 71% year-on-year from Q2 2019.
This decline can be ascribed to minimal trading by dealers and a depressed economy, said TransUnion. The group noted that South Africans are also increasingly turning to used cars.
“The used-to-new ratio has been trending upward after lockdown to an average of 2.31 in Q2 2020 vs. 2.16 in 2019.
In the used vehicle market, 33% of vehicles sold are under two years old — an ongoing trend for Q2 2020, it said.
“Demo models financed made up 6% of used financed deals, indicating consumers are choosing older vehicles as pressure on disposable income increases.”
What people are paying
TransUnion’s data shows that South Africans are also increasingly targeting cars in the sub-R200,000 range.
Where consumer purchasing power appeared to be growing throughout 2019, this has been pushed back with a shift to financing new and used vehicles under R200,000 over the past quarter.
“We expect this trend to continue during 2020 as market sentiment continues to decline, while increases in vehicle pricing are likely to cause a drop in vehicle finance in the over R300,000 price bracket,” it said.