SA’s car market stuck in reverse gear as economy falters

South Africa's vehicle pricing index for the last quarter of 2019 has indicated that the country's car market is struggling amidst economic challenges, with experts warning of a prolonged period of depression. The report, released by TransUnion Africa and West Bank Motor Division, highlights various factors contributing to the market's downturn. Both new and used vehicle prices are below the Consumer Price Index (CPI), signaling affordability for consumers. However, despite favorable pricing, consumers are facing challenges such as limited disposable income, affordability issues, and high total cost of ownership. The volume of both new vehicle sales and vehicle finance deals has been declining, with a noticeable shift from new to used vehicles. According to the experts, this trend has been ongoing for several quarters, reflecting a consumer behavior change. Used vehicle finance volumes have seen a slight uptick, while the total pool of vehicle sales has remained stagnant. This shift in consumer preference from new to used vehicles underscores the financial strain faced by consumers amid tough economic conditions. Ghana Massivi, CEO of West Bank Motor Division, emphasized the prolonged nature of the market's challenges, dating back to 2013. Despite a temporary improvement in 2017, the market has not fully recovered. The pressure on consumers is evident through installment payments and non-performing loans, reflecting the financial strain on individuals. While bad debts remain a challenge, Massivi highlighted the importance of conducting affordability analyses to mitigate risks. Amidst economic difficulties, the discussion also touched on potential disruptors in the market, such as ride-hailing services like Uber. While these services offer alternative transportation options, South African consumers still have a high affinity for vehicle ownership. The experts noted that there is a growing demand for vehicle ownership, with consumer intent and interest remaining high. However, challenges such as credit availability and equity limitations can hinder the purchasing process. Looking to the future, the conversation turned to potential market stimulants. Both experts emphasized the need for policy certainty, business and consumer confidence, and GDP growth to revive the automotive sector. Suggestions included reducing import taxes on vehicles to improve pricing and consumer confidence. Additionally, innovative financing models beyond traditional ownership structures could provide consumers with more flexibility and choice. As South Africa navigates economic uncertainties, the upcoming budget speech on February 26 will be crucial for the automotive industry. Experts will be looking for policy reforms, tax adjustments, and supportive measures to boost the market. By addressing these key issues, the country aims to revitalize its car market and drive sustainable growth in the face of ongoing challenges.