New car? 'Time to buy is now!'
ROSY PROSPECTS FOR SA CAR MARKET: The outlook for South Africa's passenger vehicle market looks rosy, experts said at a function on Thursday, with favourable buying conditions expected to continue for some time.
Author: HAILEY PHILANDER
JOHANNESBURG - There’s never been a better time to buy a car was the consensus of a number of South Africa’s leading automotive brains at a discussion to determine where South Africa’s vehicle market is headed.
Derik Scorer (National Automobile Dealers’ Association chairman), Keith Watson (sales head for Standard Bank’s Vehicle and Asset Finance division), Brian Smith (Renault head of fleet and pre-owned) and Roland Reid (Jaguar Land Rover’s marketing director) participated in a panel discussion to share their thoughts on a variety of issues affecting South African car buyers.
Topics included vehicle affordability, private leasing and the cost of ownership, green motoring and after-sales and service and what to expect on the road ahead.
AFFORDABILITY BIG CONCERN
Despite the speakers' varied backgrounds, each agreed that the current economic environment – with interest rates being the lowest in decades and recent car price increases kept in line with or below inflation – presented a favourable buying environment for otherwise cash-strapped South Africans.
Smith said: “Original equipment manufacturers have looked at the affordability issue and considered, with their finance partners, the best way to get buyers into cars. Car prices, since 2000, have remained largely static and the National Credit Act (passed in 2006) now allows longer payment terms – up to 72 months.”
While Reid admitted the typical Jaguar Land Rover driver at the top end of the vehicle market was largely unaffected by finance issues Scorer insisted that at the lower end of the local market “some thought is needed on innovative finance". He added: “Whereas the emerging black market was previously targeted, which accounted for what showed as huge growth in the late 1990's into the 2000's, we now need to go to market with genuine deals that stand up scrutiny."
Smith agreed but added that sustainable growth in the South African vehicle market required “innovative but also responsible finance solutions”.
Echoing an earlier comment by Reid, Smith also added that it was important to strike a balance between affordability and aspiration. One way to address affordability, parties agreed, would be to introduce potential customers to the option of private leasing – an option both Smith and Watson admitted had not featured on the top of their companies' lists of priorities.
'OBSESSED' WITH OWNERSHIP
Watson explained: “The South African consumer still has an obsession with ownership, still wants to own a vehicle, still believes he or she can make some money out of the sale of the car. Perhaps 20 years ago you could, but no longer - it's a bit more competitive now. There's a huge opportunity for private leasing in South Africa and it's going to come."
Scorer agreed, saying the "obsession" with vehicle ownership stunted the growth of private leasing in the local market; Reid added that South Africans wanted to pay for a car knowing they'd have something at the end of the payment term – they didn't want to pay only for use of a car.
The panel agreed that service or maintenance plans were increasingly important selling points; environment-friendly vehicles, however, were not seen as playing a big role in a purchase decision.
All parties bemoaned the lack of green car-buying incentives from the government; the state's choice was to impose a contentious carbon tax (introduced in 2010 for vehicles emitting more than 120g/km of CO2) that further increased the initial cost of a vehicle. Reid added that even if there were buyers for clean and green vehicles - of which there are a number available in SA - there was no cost relief. The decision then hinged on affordability.
Watson admitted that Standard Bank’s data showed its customers were not driven by low emissions but rather the aspirational worth of their cars; Smith added that purchases continued to be driven by consumers’ pockets and while CO2 was not a consideration for most Renault’s customers fuel consumption was vital.
Another impediment to the drive to greener motoring identified by Reid was the quality of local fuel. “We (JLR and other OEM's) could bring some cars to South Africa with lower CO2 emissions if our fuel was better - many modern cars simply can’t run on EU2 fuel."
Looking ahead, all the panelists were bullish about their predictions for SA's car market in 2012 and beyond. With interest rates expected to remain low, growth expectations range from five to eight percent to 12-15% at the top end of a market that continues to expand. Scorer’s biggest concern, he admitted, was the oil price, which could adversely affect peoples’ ability to buy new cars.
"Outside petrol prices, toll fees and other factors beyond vehicle owners control will come to bear."
And while political instability and the European debt crisis and their possible effects were also identified as causes for a possible hiccough in plans for South Africa’s automotive segment the overall prognosis, based on the optimism of some of the industry’s leading minds, appears positive.