Brand loyalty, which traditionally has seen consumers stick with the same brand whenever they buy a new vehicle, is being undermined by economic pressures. Buyers are looking for anything they can afford, National Automobile Dealers’ Association chair Brandon Cohen said last week.
Premium carmakers, particularly German ones, have already seen their market share eroded as potential buyers shift to cheaper brands offering the same features, if not status, for less money. Now it’s happening across the board as medium-range brands also come under pressure from newcomers.
Cohen said on Friday they were observing a trend of consumers downsizing and conducting extensive research into pricing and financing options.
“Affordability remains a crucial factor in purchasing decisions. South Africans are increasingly turning to more budget-friendly vehicles due to economic challenges, high interest rates and escalating fuel costs,” he said.
Traditional brand loyalty is “going out of the window”, he said. Chinese brands, particularly, were profiting from the switch, though Japan’s Suzuki has arguably benefited most.
Cohen was speaking after February’s new-vehicle sales figures, published by industry association Naamsa, showed a continuation of the market slump that began last August. Naamsa reported that 44,749 new cars and commercial vehicles were sold in February. That was 413 units, or 0.9%, fewer than the 45,162 of February 2023. As a result, the aggregate market for the first two months of 2024 was 86,964, or 1.7% fewer than the 88,456 at the same stage of 2023.
Car sales last month were 3.1% lower than the year earlier, from 29,782 to 28,857. After two months, they were 4% in arrears. Light commercial vehicles — primarily bakkies and minibuses — were 2.5% ahead, and extra-heavy trucks 15.7%. Medium trucks trailed by 0.3% and heavy trucks by 2.9%.
Those looking for positive market signs will be relieved that February’s downward trend was the slowest for several months. The 0.9% reduction from the previous February was the best year-on-year performance since July 2023.
WesBank marketing head Lebo Gaoaketse said on Friday: “February sales were the smallest decline in sales over the past seven consecutive months of negative growth. The month also represented a fairly robust volume, which was slightly higher than the average monthly sales last year.”
Gaoaketse said that consumer applications for vehicle finance were markedly higher than last year, even if most of those who applied lacked the financial and credit standing to be accepted.
Naamsa CEO Mikel Mabasa said, however, that there was no quick fix to weaker vehicle sales. “The persisting economic strain remains a real concern for household income and the weak new-vehicle market reflects [the fact] that middle-income households are restricting big financial commitments for items such as vehicles.
“The ripple effect of higher interest rates, higher fuel prices and no relief for personal income taxpayers in the 2024/25 tax year will continue to impact household incomes for the foreseeable future.”
Fortunately for local vehicle manufacturers, exports accounting for two-thirds of SA motor industry production flourished in February. At 39,617, they outsold the 30,991 of February 2023 by 27.5%. After two months of 2024, exports were 13.8% ahead of 2023 — 58,797 against 51,675.
Mabasa said: “Both advanced and emerging economies are likely to see modest economic growth in 2024, which would support the SA automotive industry’s export performance.”
Update: March 3 2024
This story has new information throughout.
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