South African consumers should brace themselves for another round of new-car price increases, says Associated Motor Holdings (AMH) CEO Manny de Canha.
AMH imports brands such as Kia, Tata and Hyundai.
De Canha says vehicle prices will need to increase by another 10% up to around March to compensate for the rand, which has weakened significantly against major currencies this year.
He says new-vehicle prices have jumped by about 25% over the past three years, at around 8% a year – significantly higher than inflation.
De Canha says AMH’s research shows that the much-publicised wage deal increases of “10% . . . 12%” do not reflect national average income gains, of around 4%.
This discrepancy, aided by poor economic conditions, will probably see the new-car market reach around 600 000 units this year, well down from the all-time-high market of 715 000 units of 2006.
However, notes De Canha, “600 000 units is still a good market. – pre-1994, it was probably half this”.
Rapid car price increases have seen a jump in the sales of small cars in South Africa, with 47% of new passenger car sales in the first eight months of the year recorded in the small, more affordable A- and B-segments.
These segments include vehicles such as the Volkswagen Polo Vivo, Toyota Etios, Hyundai i10, Honda Brio and Tata Indica.
De Canha believes the strong buying-down trend evident in the local market – with consumers forced to look at vehicles priced at around R160 000 – will continue into the foreseeable future.
Only 41% of South African new-car buyers can afford a family-size car, he says.
“The average family car costs around R318 000.
“It is true: the rich get richer and the poor get poorer. The top end of the market is growing and the bottom end is growing.”
He believes the South African new-car market will probably “stagnate” for the next “two to three years”, owing to car price increases, and wages struggling to catch up with the price tags on new vehicles.
De Canha says the new-vehicle market loses around 1% of buyers to the used-car market each year, as they can no longer afford a new car.