Audi has called for the SA government to support the industry, describing the market conditions in the premium vehicles segment as the most challenging in a decade.
The German car major is alongside other players facing fire from Chinese brands that have gained a foothold in the SA market. Adding to the turbulence, Audi flagged “inconsistent” policy implementation as a bottleneck to the industry’s growth.
Audi, a subsidiary of the Volkswagen Group, said the premium vehicle sector has contracted to nearly a third of its size compared with a decade ago, with 2024 marking the lowest level yet.
Audi said the problems besetting the sector are compounded by the absence of a regulatory framework and incentive support schemes by the government, such as those available for battery electric vehicles in other industrialised nations.
“The need exists for a comprehensive automotive strategy, as well as decisive action and support from the government, to ease the burden on all automotive players invested in the country,” it said.
“The industry continues to face hurdles such as slow and inconsistent policy implementation and insufficient infrastructure investment. Moreover, the entry of new brands has led to substantial and heightened competition in the retail space.”
The retail industry has “undergone dramatic shifts since the Covid-19 pandemic”, which it said had influenced consumer behaviour and dealership strategies.
“The premium automotive sector has faced significant pressures, marked by a notable buying-down trend driven by high inflation, rising interest rates and exchange rate weakness,” Audi said.
The need exists for a comprehensive automotive strategy, as well as decisive action and support from government, to ease the burden on all automotive players invested in the country.
— Audi
“These factors have intensified both affordability pressures on the consumer side and pricing pressures on the manufacturer side,” it said.
“This has prompted buyers to explore alternative options from new brand entrants primarily targeting the price-sensitive volume segment with well-equipped vehicles, despite these brands often having a limited track record, potentially affecting residual values and consumer experience.”
Standard Bank last year said Chinese car brands were defying market challenges in SA, having registered sales growth consistently since 2022.
According to the lender’s data, Chinese cars had mostly found favour in Gauteng, where Standard Bank concluded 54% of Chinese car brand deals, followed by KwaZulu-Natal and the Western Cape.
Haval is the most popular Chinese brand financed by Standard Bank since 2022, followed by Chery and BAIC.
SA’s largest second-hand car dealer, WeBuyCars, has enhanced its buying strategy and is positioning itself to integrate popular Chinese brands into its network.
WeBuyCars, which has Toyota, Ford and VW as its top-selling brands, in February said it had taken note of the rise in popularity of Chinese brands in SA.
It said over the past 18 months, SA consumers have embraced the expanding range of Chinese vehicles available in the local market.
The latest Chinese entrant in the domestic market, Jetour, launched in September 2024, with 40 showrooms nationwide, and Chinese manufacturers had 10% of the new-vehicle market share in September.
“Notable brands include Haval, Chery and BAIC, which have gained traction among cost-conscious consumers,” WeBuyCars said in its 2024 annual report.
“Chinese vehicles are expected to make up a growing share of the used vehicle market in the years to come. WeBuyCars, with its brand-agnostic approach, is well positioned to integrate these vehicles into its inventory management and sales strategy.”
Audi has introduced several initiatives to ramp up sales in a tricky environment. These include extending its freeway plan to 15 years and 300,000km of coverage.
Meanwhile, VW on Wednesday said it was gearing up to produce a new SUV in its Kariega, Eastern Cape, factory.
To this end, the company will halt assembly of the popular Polo and Polo Vivo from mid-May, allowing for upgrades to its plant, as part of a R4bn investment announced at the VW Indaba event a year ago.
“This project is understandably a very exciting one for us,” said VW production director Ulrich Schwabe.
“When the first unit of this new vehicle rolls off our production line, it will be a proud moment for the entire Volkswagen Group Africa family, and I firmly believe this new vehicle will be just as iconic as the beloved Polo and Vivo we are already building.”
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