South Africa’s car-buying habits have drastically changed within the last few years, with more and more people shifting down-market in search of affordable transport.
This is according to Lightstone’s chief analytics officer, Paul-Roux de Kock, who recently said that economic pressure is creating new trends within the industry with certain brands losing favour while others have seen a dramatic uptick in sales.
An out-of-touch market
The price of new cars has shot up within the last five years, as the average cost of both light commercial and passenger vehicles is now set at around R530,000 – far exceeding what most households can afford.
To put this in perspective, most financial institutions recommend that individuals do not commit more than 20% of their gross salary on vehicle repayments.
Using this advice as a guideline, a motorist can spend at most R11,685 of their monthly salary on car instalments, assuming a 5-year/60-month plan at the current interest rate of 11.25%.
This means a person needs to earn approximately R58,425 per month in order to afford the average going rate for a car in South Africa, provided they stick to the guidelines laid out by financial experts.
Of course, this figure is far greater than what the vast majority of income earners receive each month, as the typical salary in the second quarter of 2024 came to around R27,450 per month.
In other words, a monthly repayment on an average car will require half of a person’s salary, excluding additional costs like fuel, maintenance, and insurance.
Bear in mind that this dilemma is exacerbated the higher up the price spectrum you go, as something like a BMW 3 Series will now set owners back at least R913,730.
Given that this is an unsustainable trend, both automakers and consumers have reacted to the market in different ways.
Legacy manufacturers and financial institutions have introduced creative new financing options in order to try and make monthly payments more affordable relative to what people earn, according to Daily Investor.
This includes extended payment terms, balloon payments and guaranteed buyback programs.
Customers, on the other hand, are voting with their wallets by switching to new, more accessible brands – predominantly from Asia.
The two trend-setters in this regard are India and China, which produce the vast majority of affordable cars imported to South Africa.
Several carmakers including Suzuki, Toyota, Hyundai, Honda, and Citroen have also started to manufacture vehicles in India, which have proven to be a big hit in our market.
Suzuki in particular has skyrocketed up the charts to the point it is now South Africa’s third best-selling brand behind Toyota and VW.
Adding to this, Toyota’s sales are partially inflated thanks to its partnership with Suzuki, which has resulted in badge-engineered models like the Starlet hatchback which sell thousands of units every month.
The other big winner of this consumer shift has been Chinese automakers, which have been launching in South Africa in rapid succession in an effort to carve out a market share.
The leaders of the pack are Chery and GWM, which now consistently place as the nation’s seventh and eighth best-selling nameplates, putting them ahead of 18 legacy badges such as Mazda, Land Rover, Volvo, and Mercedes-Benz.
The success behind these Indian and Chinese makes lies in the simple fact that they are affordable compared to the local competition, as South Africa only produces a single budget model in the form of the R266,600 VW Polo Vivo.
Price is only half the equation though, as these new Asian brands have seen a remarkable improvement in quality over the last decade to the point they can now offer a premium experience for a fraction of the cost.
Case in point is the fact that you can now buy a Chery Tiggo 4 Pro SUV for nearly the same price as a base Polo Vivo, despite the latter being ostensibly tailor-made for our market as a stripped down hatchback.
According to De Koch, Chinese brands have used this low-cost strategy to secure a big chunk of the market, and are now transitioning into the luxury space as well now that they have established an identity here.
Models like the Tiggo 4 Pro and the Haval Jolion may be Chery and GWM’s bread and butter, but both companies have since branched out into more expensive territory with the release of units like the R785,900 Omoda C9 and the R1,222,900 GWM Tank 500.
Those prices may sound like a lot, but they are still significantly cheaper when you compare them to rivals like the R1,136,417 BMW X3 and the R1,458,900 Toyota Land Cruiser 300.
“This movement underscores a broader industry trend: a shift from long-established, often more expensive brands to newer, more affordable alternatives in most market segments,” said De Koch.
“While perceived value-for-money varies across different segments, the overall trajectory points towards a growing consumer preference for cost-effective vehicle options.”
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