Asset finance group WesBank forecasts that about 525 000 new vehicles will be sold in the local market this year, up from the 464 122 units sold last year.

However, rising inflation, increasing fuel prices, low and stagnant economic growth, rising interest rates, the continued semiconductor shortage, a volatile rand:dollar exchange rate, low investor confidence and the rising unemployment rate may all influence the market negatively going forward, warns WesBank Motor CEO Ghana Msibi.

He notes that inflation is not being nudged along by consumers splurging on luxury items, but rather by increasing living costs.

“Consumers are spending more just to stand still. The growth in disposable income is not keeping pace with the cost of living.”

This leads to a continuing buying-down trend in the domestic car market, with only a small portion of consumers able to weather the storm and still buy into the premium sector, says Msibi.

Simply put, the local market is not producing financially fit customers for the automotive industry at the rate at which the local industry wants to sell vehicles, he notes. This demand problem will also not necessarily be solved should the war in Ukraine stop tomorrow, or if computer chips start flowing readily again, as it is proving to be more systemic in nature.

The industry can no longer merely extend the payment period for vehicles or offer higher balloon payment options in an effort to lure consumers, adds Msibi.

This affordability conundrum also means that the automotive industry is “fertile for disruption” – a challenge which is compounded by the changing face of the average car buyer, he notes.

A substantial crop of younger buyers –expanding as baby boomers exit the market – wants to pay for the use of a vehicle, rather than its ownership, and also prefers a digital rather than in-person acquisition route. They are also not loyal in terms of business relationships but are willing to ask: “What’s in it for me?”

South African consumers also do not look to the rest of Africa for their mobility solutions, but rather to Europe and how mobility is evolving there, says Msibi.

This means that the future of the domestic automotive retail environment may have to include new innovations such as dealer- based vehicle rental offerings, a rewards/points system for return business, as well as an auction system where consumers can sell their vehicle to a range of bidding dealers.

“The last big creative thing we had in our industry was the balloon payment, in my opinion,” says Msibi.

“I believe we’ll still have dealers and [vehicle manufacturers] in future, but their role will evolve. “And unless we are proactive in defining this role, we’ll have to fit into a mould that others have invented.”