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Wednesday / 17 April 2024
HomeFeatures73% of all new cars in South Africa now cost over half a million rand

73% of all new cars in South Africa now cost over half a million rand

The price of new cars is becoming harder and harder for the average salary to keep up with, as evidenced by the fact that 73.05% of all vehicles in South Africa now cost more than R500,000.

There are an estimated 1,481 different models currently on sale in the country, excluding medium and heavy commercial vehicles, and 1,082 of these models now have a price tag of more than half a million rand, representing nearly three-quarters of the new-car market.

Ever rising costs

While cars have never been a cheap or trivial purchase, their prices have shot up in the last few years owing to several factors, including inflation, supply chain disruptions, safety and legal requirements, and consumer preferences.

Looking at the supply side of the equation, the Covid-19 years saw a massive drop in demand for cars, which led to price hikes from most brands in an effort to stay afloat.

However, when countries began to roll back their pandemic restrictions, consumer spending quickly returned to pre-Covid levels, while companies across all industries were still operating at a reduced output due to worker lay-offs and factory shutdowns, leading to a supply and demand issue for several goods including cars and the components that go into them such as semiconductors, which again led to raised prices.

None of this was helped by South Africa’s economic conditions, as high taxes and import duties on cars, combined with an ever-worsening rand exchange rate, make the cost of bringing in new models even more expensive.

A BMW X3 produced at a factory in South Africa.

A more long-term driver behind rising car prices has to do with regulations, which vary from market to market but broadly entail the same things.

Safety equipment is one example, as South Africa and other regions like the European Union require all new cars to be fitted with items from anti-lock brakes to airbags, seatbelts, parking sensors and cameras.

Adding to this is consumer expectations of what a modern car should include as standard, which has given rise to the ubiquity of things like infotainment touchscreens, air conditioning, cruise control, LED headlights and more – none of which come cheap.

There’s also a less obvious trend that has led to increased window stickers, namely the sharp rise in popularity of the SUV body type.

SUVs and their smaller crossover counterparts have seen an explosion in popularity over the last decade, which has largely come at the expense of the more affordable hatchback and sedan styles, several of which have been scrapped in favour of new models in the SUV mould.

One local example is the Ford Puma, which now sits as the Blue Oval’s entry-level passenger vehicle at a starting price of R569,900, following the discontinuation of the more affordable Fiesta and EcoSport.

The Puma – Ford’s new entry-level car in South Africa

Now, it is important to note that cars on the higher end of the price spectrum tend to have a much wider selection of vehicles than the affordable sector, which inflates the difference between the two.

The Porsche 911, for example, has a whopping 31 different units to choose from, with the cheapest option clocking in at R2,158,000, while the Suzuki Celerio – one of South Africa’s most affordable hatchbacks – has three models starting at R188,900.

There are a few reasons for this, starting with the fact that it is expensive and impractical for automakers to produce a wide catalogue of mass-market units when only a few options are realistically needed.

This is why it is common to see manufacturers simplify the model range on their products a few years down the line as trends emerge and it becomes clear that the majority of consumers are choosing one or two derivatives out of the eight or so that may be on offer.

The Mazda 3 had its model range slashed in half in 2023.

For luxury brands, however, price is ironically less of an issue once you enter the multi-million-rand bracket.

At this level, clients are less concerned with the cost and more interested in finding a car that suits their exact tastes.

In any case, the end result is the same for South African motorists, who are finding themselves on the short end of the stick as car prices continue to outpace salary growth in real terms, especially when this is combined with the more general rise in the cost of living with food and petrol prices and other expenses.

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