Auto sales return to pre-Covid levels, but storm clouds are gathering – TransUnion

16th September 2022

By: Irma Venter

Creamer Media Senior Deputy Editor


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South Africa’s automotive industry continued its recovery from Covid-19 in the second quarter of the year, with vehicle sales reaching levels last seen before the pandemic.

A growing number of those deals are for new cars, with the number of new-passenger finance deals increasing 34% year-on-year, compared with 5.4% for used-passenger vehicles, notes the latest TransUnion South Africa Vehicle Pricing Index (VPI) report.

The index also shows that new-car prices still lag inflation, while used cars continue to become relatively more expensive.

The latest TransUnion VPI for new vehicles moved from 6% in the second quarter of last year, to 3.9% in the second quarter of this year, with the used-vehicle index soaring from 4.9% to 8.3% in the same period. 

In contrast, South Africa’s overall inflation rate was 5.9% at the start of the second quarter of this year. 

The VPI measures the relationship between the increase in vehicle pricing for new and used vehicles from a basket of passenger vehicles, which incorporates the 15 top volume brands. 

The index is created using vehicle-sales data from across the industry.

As a result of the new pricing trends, the ratio of used-to-new vehicles sold shifted significantly in the past quarter, notes TransUnion.

A year ago, 2.67 used vehicles were sold for every new vehicle.

In the second quarter of this year, however, this declined to 2.1. 

Within the used-vehicle market, 27% of cars sold were less than two years old, with this number continuing to decrease as the supply of quality used vehicles remains under pressure. 

Demo models financed made up 4% of used financed deals. 

TransUnion Africa auto information solutions VP Kriben Reddy says the recent growth numbers have to be taken in context, and warns that lagging indicators like rising interest rates could still impact on sales 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 4 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.”

Consumer Choices
According to the TransUnion VPI report, consumer buying patterns showed that one in three (33%) of new and used financed vehicles were hatchbacks, while one in five (20%) were sports utility vehicles. 

Sedans retained their market share, although this was mainly in the used-vehicle market, where supply remains 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; between R200 000 to R300 000; and over-R300 000 has had year-on-year movement in the second quarter of 2022, with a clear move from under-R200 000 to the over-R200 000 bracket. 

“Looking ahead, the big challenge for the industry is to transform itself to drive the transition to electric vehicles (EVs) as fuel prices continue their upward trend and the need to reduce emissions becomes more pressing,” says Reddy.

“Our local production facilities will have to invest and tool up to manufacture more EVs to meet demand, and dealers should be driving the uptake of EVs by educating consumers.”

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor




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