SA vehicle sales slip, prices soar

Vehicle sales in South Africa have experienced a significant decline in the first quarter of 2023 due to soaring vehicle prices, reduced consumer disposable income, and a negative sentiment among consumers and businesses. The latest TransUnion's Vehicle Pricing Index (VPI) for Q1 2023, released today, sheds light on these findings. The CEO of TransUnion, Lee Naik, joined CNBC Africa to discuss the specifics influencing these results. The increase in the new vehicle price index from 4% to 6.3% and in used vehicle prices from 7.9% to 8.1% has raised concerns. Naik attributes these price hikes to the global chip shortage that impacted manufacturers during the height of the COVID-19 pandemic. The limited supply of silicon chips led to a decrease in new cars entering the market, resulting in a surge in demand for used vehicles. This surge in demand has driven up prices in the used car market, surpassing the increase in new car prices. One notable trend in consumer behavior is the preference for sports utility vehicles (SUVs) and mid-sized SUVs due to their perceived value for money in the current economic climate. As consumers face financial constraints, they are deferring purchases to ensure they can afford repayments to banks and lenders. The demand for mid-sized SUVs has caused a substantial 14.2% increase in pricing for used SUVs that are around three years old. Despite the challenges posed by rising vehicle prices, consumers are adapting to the changing market dynamics. Some are turning to mobility-as-a-service options, where they can access vehicles through subscription services or rental agreements. Alternatives like plugless hybrid vehicles, which charge their batteries while moving, have also gained traction among consumers seeking cost-effective and sustainable options. The shifting consumer trend towards mobility-as-a-service reflects a broader pattern of households cutting back on discretionary spending, including vehicle purchases, amid economic pressure. Naik notes that as households prioritize essential expenses and manage credit agreements with financial institutions, they may limit their future credit access if they default on payments. Individuals who struggle to secure traditional financing are potential candidates for mobility-as-a-service offerings, which provide flexibility and shorter commitment periods compared to traditional lease agreements. These services cater to consumers wary of committing to long-term financial arrangements amidst uncertain economic conditions. The emergence of mobility-as-a-service as a viable option for consumers facing financial constraints underscores the need for innovative solutions in the automotive industry. As South Africa navigates economic challenges and evolving consumer preferences, the vehicle market is witnessing a shift towards alternative ownership models and sustainable transportation options. In conclusion, the current landscape of South Africa's vehicle sales reflects a complex interplay of economic factors and consumer behaviors. While challenges such as rising prices and constrained disposable income persist, the industry is witnessing a transition towards flexible, accessible mobility solutions that cater to the evolving needs of consumers in a challenging economic environment.