South Africans dumping BMW and Mercedes-Benz

Due to economic headwinds over the past decade, prospective vehicle owners have turned away from luxury cars to more affordable alternatives that offer better value for money, such as cars from Asia.

Sales numbers over the last ten years show a declining demand for luxury cars in favour of cheaper alternatives in South Africa.

In 2014, luxury brands such as Audi, BMW, Mini, and Mercedes-Benz collectively sold around 74,015 vehicles in South Africa.

As of the end of 2024, this number had dropped to 23,881. This translates to a 68% drop in sales—highlighting the stagging amount of South Africans who no longer see these vehicles as an option.

The biggest loser was Mercedes-Benz, dropping 82% to 5,048 sold units in 2024 from 28,993. This was followed by Audi (-70%) and then BMW and Mini (-50%).

In contrast, vehicles from Asia—such as Chery, Haval, and Suzuki—have seen massive growth over the same period.

In 2014, these three car brands collectively sold 8,127. This has increased by a whopping 1,000% to 89,416 in 2024.

This is primarily thanks to Sukuzi’s impressive growth, which increased sales from 6,402 in 2014 to 56,109 (776%) in 2024.

While Suzuki almost hit 60,000 sales last year, Chery grew 1,435% from 1,297 to 19,911 in 2024, and Haval grew 3,029% from 428 to 13,396 in 2024.

The National Automobile Dealers’ Association (NADA) told BusinessTech that this trend is due to the price-sensitivity shift in the South African market over the years.

“The South African vehicle market is increasingly price-sensitive, with affordability remaining a challenge due to high inflation, interest rates and fuel costs.

“Most buyers are now shopping in the sub-R350,000 range, where Chinese brands offer strong perceived value at an accessible price point,” said NADA.

“These vehicles provide high-quality specifications, advanced technology, and competitive pricing, making them an attractive alternative to traditional luxury brands.

“Dealers welcome these options as they cater to a broader customer base.

“However, over the medium to long term, factors such as running costs, reliability, parts availability, crash panel replacement, and resale value will ultimately determine which brands succeed and which fade from the market,” the association added.

Wealthy buyers feeling the pinch

Benay Sager, executive head of DebtBusters, highlighted during the release of DebtBusters’ Q4 2024 Debt Index that South Africans taking home more than R35,000 per month are under severe pressure.

He said that while the economic environment improved in some respects, the underlying financial strain on households persists.

Sager noted that one of the most concerning trends is the rising debt-to-annual income ratio, which climbed for the second consecutive quarter in Q4 2024 and is now standing at 113%.

He added that the financial strain is particularly concerning among South Africa’s middle to high-income earners.

“Consumers earning R20,000 per month face a debt-to-income ratio of 137%, while those taking home R35,000 or more grapple with a staggering 187% ratio—the highest levels ever recorded,” he said.

Sager also pointed out that this situation of unsustainable debt levels is exacerbated by stagnant salary growth.

“Compared to 2016, South Africans have seen a 42% reduction in purchasing power. While nominal incomes are 2% higher than eight years ago, cumulative inflation of 44% has eroded real earnings,” he said.

“Even for those earning R35,000 or more per month, where nominal incomes have grown by 10%, the gains are negligible when adjusted for inflation,” said Sager.

This environment has materially impacted the sales of premium vehicles, as South Africans prioritise affordability and value for money.

“Affordability is still a major concern for buyers, and this pressure is evident nationwide,” said NADA.

“We’re witnessing competitive Chinese brands gaining traction, offering consumers affordable alternatives that are reshaping the market,” it added.

A recent analysis by BusinessTech on the price changes of German luxury cars over the last four years underscores the pressure of affordability.

The Audi A1 now costs R523,200, 18.6% more than its price of R441,000 in 2021. BMW’s 1 Series is now R713,395, a 29% increase from R553,220 in 2021.

The Mercedes-Benz A-Class has seen the most significant price increase. It now costs R826,024, 41% more than the R585,960 price tag it had three years ago.

These increases are much higher than inflation, especially for BMW and Mercedes-Benz, which went far beyond the 20% inflation rate over the same period.

The long-term trend of price increases made by these manufacturers also paints a stark picture of escalating costs.

For example, a Mercedes-Benz GLA200 that cost R400,000 in 2014 now costs R926,703, marking a staggering 131.4% increase in just 10 years.