SA car prices increase slower than inflation
Good news for consumers but not for motor industry as TransUnion reveals latest Vehicle Pricing Index
Vehicle prices in SA are increasing slower than inflation, according to the latest TransUnion SA Vehicle Pricing Index (VPI).
The VPI measures the relationship between the increase in the pricing of new and used vehicles from a basket of passenger vehicles sold locally.
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 the major banks.
The Index for the first quarter of 2019 was 2.3% for new vehicles and 1.8% for used vehicles, which means that prices continue to increase more slowly than the 4.1% inflation rate, says Kriben Reddy, head of TransUnion Auto.
The VPI fell for the seventh consecutive quarter as the effects of fuel hikes, challenging economic conditions and electricity outages caused by load-shedding took their toll, said TransUnion.
New-vehicle sales have declined nearly 10% compared to the first three months of 2018, with the total number of vehicles financed — including used vehicles — down 8%.
This decline has broader ramifications for the entire economy, as the automotive industry contributes an estimated 7.7% to SA's annual GDP, says TransUnion.
But it’s not all bad news for the South African automotive industry.
“While domestic sales are progressively dropping, exports are on the rise: showing strong growth of 29.5% year on year in January, 22.5% in February, and 23.7% in March. Still, it might not be enough for the industry to reverse its decline by the end of the year.
“The car industry in general is still in decline, and is taking strain from several quarters right now: an ongoing subdued macroeconomic environment, the lag effect of the 2018 interest hike, weaker exchange rates, lower business confidence in the run-up to the elections and constrained household disposable income have all had an effect on vehicle sales,” said Reddy.
Load-shedding has also played a role, with the number of valuations being done and the volume of footfall through dealerships being clearly affected by power outages, he adds.
“There’s broad consensus that we’ll see a minor recovery in the auto market second half of the year, but the fear is that it won’t be enough to compensate for the first-half decline.”
The effects of prolonged pressure on consumers can be seen through the fact that more consumers are buying used vehicles than new vehicles. The TransUnion VPI report shows the used-to-new vehicle ratio declined to 2.13 from 2.09 in the previous quarter, which means that 2.13 used vehicles were financed for every new vehicle financed.
People are also spending less on cars, with the percentage of cars (both new and used) being financed below R200,000 staying steady at 37%, which is consistent across the last three quarters.
In all, 35% of used vehicles sold were less than two years old, with 10% of those being demo models. There is a significant price differential between new and used vehicles in SA, so demo models and used vehicles less than two years old offer attractive alternatives to purchasing a new vehicle, with the baseline price of new vehicles now firmly in the R200,000 to R300,000 band, says TransUnion.
“We anticipate domestic car sales will probably end the year between 3% down on 2018,” said Reddy. “The indicators suggest a better 2020, with the latest GDP figures showing early signs of a turnaround, which should translate into improved consumer confidence and trading conditions.”
Total new-vehicle sales last year were 552,226 units last year, from a peak of 714,315 in 2006.
SA’s best selling vehicles – how their prices compare to a year ago
APRIL 2018 vs APRIL 2019
VW Polo Vivo 1.4 Trendline R179,900 R191,400
Toyota Corolla Quest 1.6 R215,200 R222,900
VW Polo 1.0 TSI Comfortline R264,700 R281,100
Hyundai Grand i10 1.0 Motion R154,900 R167,900
VW Polo Vivo 1.4 Comfortline R192,000 R202,600
VW Polo 1.0 TSI Trendline R235,900 R249,900
Renault Kwid 1.0 Dynamique R137,900 R144,900
Datsun GO 1.2 Lux R166,300 R132,900
Toyota RAV4 2.0 GX CVT R395,300 R427,600
Toyota Quantum 2.5 D R433,300 R444,200
Nissan NP200 1.6 8V Base R167,000 R173,500
Ford Ranger 2.2 TDCi XL DCab R418,300 R428,800
Toyota Hilux 2.4 GD R289,400 R302,700
* Some vehicles in this list were facelifted or updated in the last year. The Rav4 was replaced by a new-generation model.