Another bad sign for Audi, BMW, and Mercedes in South Africa
South African motorists are voting with their wallets, moving away from luxury brands like Audi, BMW, and Mercedes-Benz in favour of more affordable Chinese alternatives, and this now includes in the second-hand market.
Rising interest rates and the overall cost of living have pushed even wealthier consumers to seek cheaper options, triggering a substantial decline in the sales of luxury vehicles.
This trend poses a serious challenge for established German brands, as South African buyers are increasingly choosing budget-friendly cars, particularly from Chinese manufacturers.
In the first half of 2024, AutoTrader’s data highlighted diverging trends in new and used vehicle sales.
While the overall market has seen an uptick in sales of more affordable models, luxury vehicle sales have notably dropped.
This shift reflects the financial strain affecting all income levels in South Africa, with even affluent consumers holding back on purchasing high-end vehicles.
One of the key drivers of this change is the rise in interest rates, which has made financing new cars significantly more expensive.
As a result, many consumers are opting to “buy down,” either by switching to cheaper models or by purchasing used cars.
The impact of this trend is most visible in the shrinking market share of luxury brands like BMW, Audi, and Mercedes-Benz, whose sales have been steadily declining over the past decade.
AutoTrader’s Mid-Year Car Industry Report suggests that this shift is unlikely to reverse anytime soon.
It anticipates that demand for more affordable vehicles will continue to grow, putting sustained pressure on luxury brands.
The report also points to the growing popularity of Chinese brands and other cost-effective options as a direct response to the financial constraints facing South African consumers.
According to the report, 172,668 used cars were sold by the end of June 2024, marking a 2.2% increase compared to the previous year.
In contrast, new car sales fell by 6.9% during the same period, with a total of 161,981 passenger cars sold.
Within the new car market, South Africans are increasingly turning to budget-friendly alternatives, with Chinese brands and Suzuki seeing a surge in popularity.
For the first time, Suzuki made it into the top 10 most-searched-for brands on AutoTrader, replacing luxury brand Porsche, and the Suzuki Swift has emerged as one of the top 10 most-enquired-about models, pushing out the Ford Fiesta.
This shift in consumer preference is having a profound effect on the sales of traditional luxury brands.
Audi, for example, saw its sales drop from 18,375 vehicles in 2014 to just 6,259 in 2023.
BMW and Mercedes-Benz have experienced similar declines, with their combined sales more than halving over the same period.
The affordability crisis in South Africa has made these brands increasingly out of reach for many consumers.
In contrast, Chinese brands are gaining ground rapidly. AutoTrader’s research shows that while many consumers are opting for used vehicles when it comes to Chinese brands, they are more inclined to buy new models.
By the end of 2024, it is estimated that Chinese manufacturers will capture around 20% of the new car market in South Africa.
Leading the charge among Chinese brands are Haval and Chery, whose sales have skyrocketed in recent years.
Data from Naamsa reveals that Haval sold approximately 19,904 units by mid-2024, a dramatic increase from just 872 units in 2019.
Chery is expected to report similarly impressive numbers.
These brands, along with others like BAIC, Beijing, GWM, Jaecoo, and Omoda, are now driving the growth in South Africa’s affordable car segment.
Standard Bank’s vehicle finance division also supports this trend. Data shows that the share of Chinese brands in the bank’s new car financing deals increased from just over 6% in 2022 to 7.4% in the first half of 2024.
This growth is even more significant considering the broader decline in new car sales across the country.
GWM Haval remains the most popular Chinese brand financed by Standard Bank, followed by Chery and BAIC.
These brands have gained the most traction in Gauteng, which accounted for 54% of all Chinese car financing deals, while KwaZulu-Natal and the Western Cape are also contributing to their growing popularity.
The used car market for Chinese brands is expanding as well.
The proportion of used Chinese cars financed by Standard Bank rose from 20% in 2022 to 36% by July 2024.
Overall, used cars account for 70% of Standard Bank’s vehicle finance deals, reflecting a broader shift toward more affordable options as consumers shy away from expensive new vehicles.
This trend is part of a broader global shift toward Chinese automotive brands, driven by competitive pricing and growing consumer confidence in their quality.
The popularity of Chinese brands like GWM Haval is evident in Naamsa’s Vehicle Sales by Manufacturer list, where these brands consistently rank among the top ten.
In stark contrast, luxury German brands like BMW and Mercedes-Benz have fallen out of the top ten most popular car brands in South Africa.
BMW, which ranked eighth in 2009, dropped out of the top ten by 2019, and Mercedes-Benz, once ranked sixth, fell out in 2020.
Overall, sales of Audi, BMW, and Mercedes-Benz have plummeted by 63.5% over the past decade, with total sales dropping from 71,889 units in 2014 to just 26,202 in 2023.
This decline reflects the mounting challenges these brands face as South African consumers increasingly favour affordable Chinese alternatives.
Read: The cars you can afford with your salary in South Africa in 2024
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