The R150,000 problem with car prices in South Africa
The price of the average car in South Africa has soared over the past 30 years, rising significantly faster than inflation, with current prices exceeding inflation-adjusted estimates by R150,000.
Finding average car price data for 1994 proved to be difficult; however, using archived data from Bestsellingcarsblog.com, which lists the top-selling models of that time—such as the Toyota Corolla, VW CitiGolf, and Mazda 323—the average price of these popular vehicles was approximately R46,477 in 1994.
When adjusted for inflation, this translates to around R242,852 in 2024 terms.
Despite this, data from WesBank shows that the average new car price was R392,174 in the first quarter of 2024.
This indicates a 744% increase in car prices since 1994, significantly surpassing the inflation-adjusted price by R149,322.
However, the extent of these price hikes becomes even more pronounced when looking at specific models.
For example, the Toyota Corolla, a top-selling vehicle in 1994, cost R51,039. In 2024, the price of a new Corolla starts at R536,500—a staggering 951% increase.
This upward trend isn’t solely due to general economic factors; a poor Rand exchange rate has amplified these costs considerably.
Over the years, the depreciation of the Rand against stronger global currencies has made imported vehicles and parts more expensive, directly impacting car prices in South Africa.
The exchange rate has indeed been one of the key contributors to the country’s high car costs, but it isn’t the only factor.
Manufacturers and industry analysts point to a combination of global supply chain disruptions, evolving safety standards, and consumer demands that necessitate additional features and technologies in modern vehicles.
Cars today are equipped with advanced safety, entertainment, and emissions technology that often pushes production costs higher.
These advancements are, of course, necessary and beneficial, but they also mean that car prices will generally rise above simple inflation adjustments.
Beyond the exchange rate and global factors, local economic policies have also driven up vehicle costs.
High import duties and taxes further increase the price of cars in South Africa.
Unlike some countries that enjoy more favourable trade agreements or local manufacturing subsidies, South Africa faces additional financial burdens when importing vehicles.
These costs trickle down to consumers, making the ownership of a new vehicle increasingly unaffordable for the average South African.
A comparative study by Compare the Market Australia (CMA) underscores just how expensive cars have become in South Africa relative to other countries.
This study looked at car prices in seven countries, including South Africa, the USA, Canada, Australia, New Zealand, Colombia, and Peru, using models like the Ford Ranger, Toyota Hilux, and Honda Civic as benchmarks.
South Africa was found to have the second-highest car prices among these countries, highlighting the financial strain faced by local consumers.
The disparity between South Africa and other countries becomes even more apparent when factoring in after-tax income.
CMA used data from the OECD Better Life Index to analyse the affordability of cars based on the average disposable income in each country.
The findings revealed that South Africa has the least favourable car price-to-disposable income ratio, meaning South Africans would need more years of income to purchase a car than consumers in any of the other countries analysed.
For instance, it would take an average South African 7.8 years of disposable income to buy a Jeep Grand Cherokee, over four years to afford a Honda Civic, and nearly three years for a Toyota Hilux.
This ratio starkly contrasts with the USA, where a similar car could be purchased with only a fraction of the disposable income required in South Africa.
These affordability challenges place South Africa at a disadvantage compared to countries like the USA, Canada, and New Zealand, which enjoy more favorable car price-to-income ratios.
While Columbia ranks second after South Africa in terms of car affordability struggles, the gap remains significant.
This issue not only limits the purchasing power of South African consumers but also impacts the broader economy, as high vehicle costs contribute to decreased mobility, fewer opportunities for car ownership, and increased dependency on public transport for many.
The above-inflation cost increases of new cars in South Africa are a result of multiple intersecting factors, with the poor Rand exchange rate playing a central role.
Coupled with global and local economic pressures, these factors have placed a considerable strain on South African consumers, leaving many with few affordable options.
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