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Good news for new car buyers in South AfricaStaff Writer23 August 2022

South Africa’s automotive industry continued its recovery in the second quarter of the year, with the number of deals hitting levels last seen before the Covid pandemic struck, says consumer credit reporting agency TransUnion.

A growing number of those deals are for new cars, with the number of new passenger finance deals increasing 34% year-on-year, compared to 5.4% for used passenger vehicles.

New car prices continue to lag inflation, while used cars continue their trend of getting relatively more expensive. The latest TransUnion SA Vehicle Pricing Index (VPI) for new vehicles moved from 6.0% in Q2 2021 to 3.9% in Q2 2022, with the used vehicle index soaring from 4.9% to 8.3% in the same period.

By contrast, South Africa’s overall inflation rate was 5.9% at the start of Q2.

The VPI measures the relationship between the increase in vehicle pricing for new and used vehicles from a basket of passenger vehicles which incorporates 15 top volume manufacturers. The index is created using vehicle sales data from across the industry.

As a result of these pricing trends, the ratio of used to new vehicles sold shifted significantly in the past quarter. A year ago, 2.67 used vehicles were sold for every new vehicle; in 2022 Q2, this declined to 2.1.

In the used vehicle market, 27% of cars sold were less than two years old, and this continues to decrease as the supply of quality used vehicles remains under pressure.

Demo models financed made up 4% of used financed deals, which indicates consumers are opting for older vehicles as quality supply diminishes and pressure on disposable income increases, said the consumer credit reporting agency.

Kriben Reddy, vice president of auto information solutions for TransUnion Africa, sounded a word of caution, saying the increased numbers had to be taken in context, and lagging indicators like rising interest rates could still impact the industry going forward.

“The market is heading in the right direction, but we have to remember that a year ago we were in the midst of level four lockdowns and civil unrest, which depressed the market severely. We’re also almost certainly going to see the impact of rising inflation and interest rates at a time when household incomes are not growing at the same levels,” said Reddy.

Consumer buying patterns showed that one in three (33%) of new and used financed vehicles are hatchbacks, while one in five (20.0%) are SUVs. Sedans have retained market share, although this is mainly in the used vehicle market, where supply is constrained. Consumers between the ages of 26 and 40 bought nearly half of all vehicles financed, of which most were used.

The percentage of cars (new and used) being financed below R200,000, R200,000 – R300,000 and over R300,000 has had year-on-year movement for 2022 Q2, with a clear move from under R200,000 into the over R200,000 brackets. Consumers continue to look for value in the used vehicle market, and recent interest rate hikes have not yet affected the numbers of consumers looking to purchase.

“Looking ahead, the big challenge for the industry is to transform itself to drive the transition to electric vehicles as fuel prices continue their upward trend and the need to reduce emissions becomes more pressing. Our local production facilities will have to invest and tool up to manufacture more EVs to meet demand, and dealers should be driving uptake of EVs by educating consumers,” said Reddy.


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