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Why can't cars be cheap?

2006-08-16 07:24

Imagine an MGF sports car with just 35 000 km from new, for less than R80 000. Or a Daihatsu Feroza 4x4 with 50 000 km for less than R8 000. Both in excellent condition, and complete with a two-year warranty.

That's the reality of buying a used car in New Zealand, where the flood gates have been opened for second hand vehicles from Japan, and almost everybody has a car which they own - or soon will.

It all comes about because the Japanese Government has a very strict car safety system which increases the cost of ownership over time.

Any car over five or six years old becomes very expensive to test and service so drivers prefer to buy new cars and put the old one up for auction.

And many of these cars end up in New Zealand, which now has a thriving used car market.

On top of this all cars in New Zealand older than six years must have a safety check every six months; cars younger than that once a year. So you can be fairly confident your purchase is fit to drive.

However, the downside of all this is that new car dealers are finding it harder and harder to move stock. Why buy a new car when for a lot less you can get an excellent used buy?

Not an easy trip

But it hasn't been an easy trip to get to what at first glance seems like motoring Utopia.

New Zealand once had a small but boisterous motor industry, with nine motor companies operating 13 car plants across the country, and directly employing nearly 6 000 people, with many more employed by parts suppliers and so on.

However, the small numbers of cars being produced, plus growing globalisation, led to the New Zealand plants becoming uneconomical.

This was accelerated by a move by the government of the day in New Zealand to cut the import tariffs which had protected the tiny motor industry.

Next followed the removal of a ban on used imports - and the damage was complete.

I have just returned from visiting family in NZ, and I can tell you there are so many inexpensive options that it makes your head swim, especially when you've been used to SA prices.

My wife's nephew, for instance, is 21 years old, and installs granite kitchen tops for a living.

He doesn't earn a great salary, but he owns (yes, owns i.e. paid for) a Toyota MR2 sports car. It's in good nick, and serves as reliable daily transport.

People tell me it doesn't matter what car you own in New Zealand - they can hardly be status symbols when they cost so little in relation to earnings.

Prices report

According to a global prices report from UBS Wealth Management in Zurich, it takes an average New Zealander 1 708 working hours (simplistically, 33 weeks of net earnings) to buy a new medium sized car (Toyota Corolla 1.8).

The survey indicates a similar car in SA takes the average income earner 3 594 working hours. That's a year and 17 days!

Even more frightening is the view of National Union of Metalworkers of SA, which claims it takes the average South African no fewer than 208 weeks to buy a new car. That's four years!

But, of course, a large proportion of the SA population can't afford any car at all.

So why don't we open the door for used car imports into South Africa?

Simply, as happened in New Zealand, it would sink our local motor industry.

Although we export a fair percentage of the cars we make here, the motor industry relies heavily on local sales to justify the plants we have operating in Durban, East London, Port Elizabeth and Pretoria.

Take those local sales away and the economical justification for a South African motor industry would disappear.

Biggest player

And unlike New Zealand, whose economy is (and always has been) based largely on agriculture, the motor industry in South Africa is the biggest economic player, accounting for 7.1% of the South African gross domestic product, which is 0.8% more than the mining sector.

There are about 31 700 people employed in assembly, and around 75 000 in component manufacture, out of the some 304 000 working in the whole motor sector, including the aftermarket.

Exports have created almost 4 000 new jobs in the SA motor industry in the past few years, while the dramatic growth in car sales has resulted in many more new jobs being created in the sales and aftersales sectors.

Add it up - according to top motor industry information website Autocluster there are estimated to be around 5 500 garages and filling stations with their associated workshops in SA.

On top of that there are 3 300 specialist repairers, around 1 100 franchised new car dealerships, nearly 1 000 used-vehicle retailers, 450 specialist tyre dealers and retreaders, 500 engine re-conditioners, 80 vehicle body builders, 650 parts dealers and about 280 farm vehicle and equipment suppliers.

These generate about R100-billion annually in domestic motor business revenues.

So what does all this mean?

To put it very simply, we can allow cheap used cars into SA, but at a massive cost in terms of the economy and job losses.

In my view, it's too high a price to pay.


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