The South African automotive industry faces a challenging 2021, with new vehicle prices continuing to climb well above the inflation rate in a market already severely constrained by the financial effects of the Covid-19 pandemic.
This is according to the latest TransUnion SA Vehicle Pricing Index (VPI), which shows vehicle prices rose above the inflation rate for the third successive quarter in Q4 2020 at a time when consumers are financially constrained and many car dealers are battling to stay in business.
TransUnion publishes the VPI on a quarterly basis. The vehicle risk intelligence company calculates the VPI from data it receives on monthly sales returns from thousands of dealers throughout the country, as well as vehicle financing registrations from all of the major banks and vehicle finance houses.
Kriben Reddy, vice president of auto information solutions for TransUnion Africa, said this trend could herald further car price increases in 2021.
“The positive indicators of lower petrol prices, interest rates and inflation are not enough to move consumers into new vehicle purchases at this stage, with consumer confidence low as a result of the Covid-19 pandemic and ongoing unemployment rate concerns, negative economic growth rates and pressure on disposable income all having an impact,” said Reddy.
The group’s data shows that new vehicle pricing increased from 2.9% in Q4 2019 to 9.6% in Q4 2020. Used vehicle pricing increased from 1.2% in Q4 2019 to 2.9% in Q4 2020.
TransUnion previously pointed out that the average Vehicle Finance for a car has increased by 6.7% YoY to R315,160.
The group’s data indicates that lenders are financing 2.31 used vehicles for every one new vehicle. This ratio should remain consistent in the coming quarter, it said.
When looking at vehicle finance, the group said that more South Africans are paying above R300,000 for their vehicles.
Just under a third of people (32%) pay R200,000 or less for their vehicles. By comparison, 40% of finance deals are now over the R300,000 mark.
While the data shows that people are paying more for cars, the total number of people entering finance deals has decreased.
New and used passenger finance deals decreased by 14.8% and 6.2%, respectively, year-on-year (YoY).
Demo models financed made up 6% of used financed deals, indicating consumers are opting for older vehicles as pressure on disposable income increases.
According to the National Association of Automobile Manufacturers of South Africa (NAMSA), there’s been a YoY decline of 19.8% in new passenger vehicles from Q4 2019 to Q4 2020.