Major warning signs for Audi, BMW, Merc, and other premium cars in South Africa
The premium vehicle segment in South Africa is set to face significant challenges as sales drop due to the weak economy, high interest rates, and soaring fuel prices.
As a result, many South Africans are avoiding premium cars and opting for the new wave of Chinese vehicles entering the market.
Aggregate new vehicle sales during the first quarter of 2024 recorded a decline of 5.6% compared to the corresponding quarter of 2023 and a marginal increase of 0.2% compared to the fourth quarter of 2023.
According to the National Automobile Dealers Association (NADA), economic pressure and political uncertainty are hindering growth in the sector.
The budget speech and the upcoming general election have strained consumer pockets, compounded by the Reserve Bank Governor’s statements on maintaining high interest rates, adding to the prevailing negative sentiment.
NADA observed a trend of consumers downsizing and conducting extensive research into pricing and financing options.
“Affordability remains a crucial factor in purchasing decisions,” it said.
According to the association, South Africans are increasingly turning to more budget-friendly vehicles due to economic challenges, high interest rates, and escalating fuel costs.
The group also noted that the local market is becoming increasingly competitive, with a growing number of Asian participants – particularly Chinese brands making a significant impact in both the passenger car and overall truck markets.
According to statistics from Naamsa, there is a noticeable trend towards Chinese-manufactured vehicles.
In 2019, Haval had only sold 872 cars, while Chery wasn’t even on the radar.
Fast-forward to 2024, Chinese cars are now outselling many traditional and trusted brands such as Kia, Renault, Isuzu, and even BMW and Mercedes-Benz.
According to Naamsa’s data, Havel has sold approximately 19,904 units, representing an increase of over 2,000% from that recorded in 2019.
Additionally, these numbers show a stark increase in Haval’s sales since 2019, representing a 198% increase, while Chery’s sales are likely to be in the same region.
This shift has hit premium manufacturers such as Audi, BMW, Mercedes-Benz, and Volvo.
Sales for Audi, Mercedes-Benz, and BMW have more than halved in the last decade, with total sales declining from 71,889 in 2014 to 26,202 in 2023—a concerning 63.5% decline.
According to Lightstone’s latest statistics, sales for Audi, BMW, Mercedes-Benz, and Volvo dropped from 28,757 units in 2022 to 26,836 in 2023, a 6.6% decline, which is around the annual average since 2014 (6.35%).
What’s worse is this trend seems to be accelerating, with year-to-date sales of these car brands as of April 2024 reflecting a drop of over 10% compared to the same period in 2023.
As stated by NADA, this shift is driven by competitive pricing, quality, and high-tech specifications, which are reshaping the competitive landscape and posing challenges for traditional premium dealerships.
NADA also observed that the premium segment is under compounded pressure, with customers moving from new vehicles to demos and pre-owned cars.
The group noted that some loyal premium brand customers are extending maintenance plans, but the majority are either buying down, waiting, or transitioning to pre-owned vehicles.
This has led to significant growth in the pre-owned car market compared to new cars. Economic pressures and shifting market dynamics are re-evaluating traditional brand loyalty.
Consumers are adapting to budget-friendly options, including Chinese-manufactured vehicles, marking a significant shift in the industry landscape.
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