Colin-on-Cars – Vehicle prices skyrocket

Year-on-year comparisons of new vehicles sales are still hopelessly out of kilter with 2020 having been the hard lockdown – but, what is concerning is the fact vehicle prices have skyrocketed by nearly three times the general inflation rate during the first quarter of this year according to the latest Vehicle Pricing Index (VPI) released by TransUnion.

“When measured against WesBank’s average deal size, we can see a similar trend in the amount of finance to access these vehicle purchases,” says Lebogang Gaoaketse, Head of Marketing and Communication at WesBank.. “Compared to a year ago, new vehicle finance agreements through our book are averaging a deal size of R356 313, up 11,2%, while pre-owned deals average R253 537, an increase of 10,6%.”

Aggregate domestic sales in May 2021, at 38, 37 units, reflected an increase of 25 463 units, or
197,8%, from the 12 874 vehicles sold in May 2020. Export sales also recorded a gain of 23 425 units, or
196,8%, to 35 326 units in May 2021 compared to the 11 901 vehicles exported in May 2020.

Overall, out of the total reported industry sales of 38 337 vehicles, an estimated 33 642 units, or 87,8%,
represented dealer sales, an estimated 8,2% represented sales to the vehicle rental industry, 2,0% to industry corporate fleets 2,0%, and sales to Government.

The May 2021 new passenger car market at 24,122 units registered an increase of 15 156 cars, or a gain of 169 0%, compared to the 8 966 new cars sold in May 2020. The car rental industry accounted for 11,4% of car sales in May 2021.

Domestic sales of new light commercial vehicles, bakkies and mini-buses at 11 930 units during May 2021 had recorded an increase of 8 859 units, or a gain of 288,5%, from the 3 071 light commercial vehicles sold during May 2020.

Sales for medium and heavy truck segments of the industry also reflected a positive performance and at 559 units and 1 726 units, respectively, showed an increase of 256 units, or 84 5% in the case of medium
commercial vehicles, and, in the case of heavy trucks and buses an increase of 1 192 vehicles, or a gain of
223 2%, compared to the corresponding month last year.

The Naamsa CEOs Confidence Index, an in-house leading business confidence indicator of current and future developments in the domestic automotive industry, reflects the general agreement by the Naamsa CEOs business conditions for the automotive industry over the next six months will continue to improve.

They are mainly positive of a robust recovery in the domestic as well as the global new vehicle markets over the next six months, as the domestic and international markets rebound from the low base of 2020. However, structural constraints in the economy, coupled to the growing debt of the country and the ongoing electricity capacity limitations would continue to curb a potential quick recovery to pre-COVID-19 levels.

“This is very heartening, particularly the fact that dealer sales represented 87,8% of the total reported new vehicles sales of 38 337 units in May,” says Mark Dommisse, the Chairperson of the National Automobile Dealers’ Association (NADA).

“Strong sales through the retail dealer channel means there is an improvement in consumer confidence, which is good news for the remainder of the year. Admittedly, the figures in April and May last year were very skewed, as our members operated under stringent lockdown regulations. However, the ongoing upturn in 2021 is an encouraging positive with naamsa now forecasting year-on-year growth for 2021.

“A year ago, dealers were resuming limited retail sales in May under lockdown Level 4, but now the market is improving significantly while we await the possible negative effects that could flow from a third wave of COVID-19 infections.

“The lockdown had a devastating effect on the rental industry which has resulted in a lack of year-old cars coming onto the used vehicle stands at dealerships. That is putting upward pressure on used car pricing. This, in turn, is impacting on sales volumes of preowned models. However, it is encouraging to see that rental companies are re-fleeting again and in May these companies bought 8,2% of total vehicles and 11,4% of the passenger car volume.

“We are seeing limited new vehicle availability in certain segments due, in main, to the global microchip shortage which is taking longer to overcome than was originally presumed,” added Dommisse.

“It is also invigorating to see the introduction of and the appetite South African car buyers have for new model ranges, specifically in the Compact SUV segment, such as the Toyota Urban Cruiser, Toyota Starlet, Suzuki Vitara Brezza, and the ongoing stream of new models from Hyundai and Kia. Notable as well is, the Peugeot 2008 and the Haval Jolion, with Nissan set to join the fray with its Magnite crossover.”

Leave a Reply