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Wednesday / 19 June 2024
HomeFeaturesAlarm bells for BMW, Mercedes, and other high-end car brands in South Africa

Alarm bells for BMW, Mercedes, and other high-end car brands in South Africa

Cash-strapped South African motorists are increasingly ditching high-end nameplates from Europe and opting for more affordable Chinese vehicles when making their next purchase.

The new-car market saw its seventh consecutive contraction in February with the 44,749 vehicles being purchased across the country reflecting a year-on-year decline of 0.9%, and the National Automobile Dealers’ Association (Nada) attributes this performance to economic challenges, elevated interest rates, and escalating fuel costs.

The parties that have been the worst affected by this are traditional premium automakers whose vehicles are on the more expensive end of the spectrum.

“We observe a trend of consumers downsizing and conducting extensive research into pricing and financing options. Affordability remains a crucial factor in purchasing decisions,” said Nada chairperson Brandon Cohen.

“Statistics from Naamsa highlight a shift towards Chinese-manufactured vehicles, driven by competitive pricing, quality, and high-tech specifications.”

Cohen highlighted that customers of these high-end brands are no longer hunting for bargains on new vehicles but rather for demos and pre-owned cars, whereas the most loyal of them might choose to extend their warranties and maintenance plans rather than sell their car for a new one.

However, the majority are either buying down or transitioning to pre-owned vehicles from different manufacturers that are more affordable.

“Market dynamics, influenced by economic conditions and changing consumer preferences, are causing a re-evaluation of traditional brand loyalty,” said Cohen.

“Consumers are adapting to budget-friendly options, including Chinese-manufactured vehicles, marking a significant shift in the industry landscape.”

Illustrating this fundamental change in the industry, the combined sales of Audi, BMW, and Mercedes-Benz sank from 71,889 units in 2014 to just 26,202 in 2023.

A market-wide phenomenon

The same trend taking shape in the new market is being mimicked in the used-vehicle sector, according to Bidvest.

In Bidvest’s latest financial results, it said that its used-car business McCarthy’s trading profit declined by 11.4% over the course of 2023.

“Consumers are experiencing considerable strain on disposable income, negatively impacting demand. At the same time, there is an oversupply of vehicles from the Original Equipment Manufacturers and aggressive discounting which compresses gross margin,” said Bidvest.

“This causes a negative knock-on effect in the used-vehicle market.”

McCarthy’s sales mix is still skewed to the traditional brands, but many of them are also losing share to new entrants from Asia, the company said.

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