Share

Bad news for motorists: Vehicle prices set to increase - TransUnion SA

<B>GRIM OUTLOOK:</B> Prices of new vehicles in South Africa look set to increase. <I>Image: iStock</I>
<B>GRIM OUTLOOK:</B> Prices of new vehicles in South Africa look set to increase. <I>Image: iStock</I>

Cape Town - The South African motoring industry faced yet another challenging quarter, according to the latest TransUnion SA Vehicle Pricing Index (VPI) for used and new vehicle sales.

The Q3 2016 VPI found that the rate of new and used vehicle pricing increased further to 9.9% and 2.8% in Q3 2016 from 8.4% and 2.7% in Q2 2016 respectively, which suggests used car sales volumes will continue to rise. 

The VPI measures the relationship between the year-on-year increase in vehicle pricing for new and used vehicles from a basket of passenger vehicles which incorporates the top 15 volume manufacturers. Vehicle sales data collated from across the industry was used to create the Index.

Weakening rand

According to the report, the further increase of new vehicle prices can be attributed to a delayed reaction to the rand weakness and ongoing poor economic conditions.

Derick de Vries, CEO: Auto Information Solutions at TransUnion, said: “The ongoing recession in the domestic new vehicle market, combined with an extremely difficult economic environment points to an unfavourable short to medium term outlook.

READ: SA vehicles sales - Top locally-built cars, bakkies

“Household cash flow measures show that it is the weakest it’s been since 2010 and is reflecting no room for consumers to take on additional debt. Low levels of both consumer and business confidence combined with new vehicle pricing remaining above CPI (Consumer Price Index) will continue to add severe pressure to the new vehicle market.

"This has however seen the demand for used vehicles continue to increase considering the affordability challenges in the new vehicle market.

“Consumers tend to look for cheaper cars or hold on to their existing vehicles for longer than normal. This yearly trend continues with a new to used vehicle ratio of 2.93 in Q3 2016 as compared to 1.71 in Q3 2015. This means that for every one new vehicle financed, there were 2.93 used vehicles financed.”

Poor year-on-year sales

TransUnion data also show that there have been fewer deals financed in Q3 this year as compared to last year. TransUnion’s financial registrations data indicates a drop of around 48% and 12% on new and used financed deals respectively in Q3 2016 compared to Q3 2015. Overall, more new and used vehicles are being financed below the average of R200 000 when comparing the 38% in Q3 2015 to the 50% in Q3 2016.

Luxury vehicles have been substituted for more affordable vehicles that still provide most of the accessories that top of the range vehicles would. 

De Vried explained: "Aggregated new vehicle sales figures from the National Association of Automobile Manufacturers South Africa (NAAMSA) has shown a year to date decline of 12.4% in the passenger market, an 8.9% decline in light commercial vehicles and an overall decline of 11.3% in the auto industry.

“Manufacturers will either have to slow down production or cut margins even further to create more demand. Targeted marketing strategies and incentives will have to be implemented by dealerships to match supply to demand."

VIEW: Infographic on new vehicle sales

De Vries adds that VW has been doing well in both areas and currently sits on top for both new and used vehicles. “Toyota seems to have captured more than 15% of the new car market with Hyundai trailing behind them with 10.5%. Toyota definitely seems to be the market leader in light commercial vehicles, however Ford and Nissan have closed-in in both the new and used market.”

“Overall, the current economic conditions have slightly improved the used car market as year to date volumes have increased, although the new car market has suffered. We predict that the market will show some growth within the next 12-18 months. Vehicle-related industries need to be aware of the market factors and the demand in the used car market,” de Vries concluded. 

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE