South African unusual car buyers had been collectively paying purchase prices above the inflation rate for the third consecutive quarter in Quarter 4 (Q4) in 2020 and place are continuing to climb “properly above the inflation rate”.
Here’s according to a hard-hitting and the latest TransUnion SA Car Pricing Index (VPI) document released late last week (11 February 2021).
The VPI is released by TransUnion — a vehicle threat intelligence company — on a quarterly basis. The company calculates the VPI from data it collates based on monthly sales returns from thousands of South African dealers and vehicle financing registrations from each major banks and vehicle finance properties.
SA auto industry in for a challenging 2021
According to TransUnion, the South African automotive industry faces a challenging 2021, with unusual vehicle prices continuing to climb properly above the inflation rate in a market already severely constrained by the financial outcomes of the COVID-19 pandemic.
TransUnion made it clear that it was no longer most engaging vehicle buyers that had and would really feel the impacts of the place pinch, but that the auto industry as a total, and vehicle dealerships in particular, had fielded a challenging 2020 trading year.
“…the latest TransUnion SA Car Pricing Index (VPI) presentations vehicle prices rose above the inflation rate for the third successive quarter in Q4 2020 at a time when buyers are financially constrained and many car dealers are battling to stay in industry,” said TransUnion in its summary of its findings for 2020.
Car prices may increase additional this year
And the bad news for buyers, according to Kriben Reddy, vice president of auto information alternate recommendations for TransUnion Africa, is that this pattern may herald additional car place increases in 2021.
“The clear indicators of lower petrol prices, hobby rates and inflation are no longer sufficient to transfer buyers into unusual vehicle purchases at this stage, with user self perception low as a outcomes of the COVID-19 pandemic and ongoing unemployment rate considerations, negative economic growth rates and rigidity on disposable earnings all having an impact,” said Reddy.
Sales volumes down, prices up in 2020
TransUnion said that as anticipated, total financial agreement volumes in the passenger vehicle market decreased by 9% in Q4 2020 compared to the same length in 2019, with unusual vehicle finance deals down 14.8% and old autos down 6.2%. At the same time, the VPI for unusual autos rose sharply to 9.6% in Q4 2020 from 2.9% in Q4 2019, with the old vehicle VPI rising to 2.9% from 1.2% over the same length.
The VPI measures the relationship between the increase in vehicle pricing for unusual and old autos from a basket of passenger autos based on data from 15 high volume manufacturers.
“The index is created the usage of car sales data from across the industry,” explained TransUnion.
Former autos outsell unusual
The old-to-unusual vehicle ratio in Q4 2020 remained largely consistent, at 2.31. This means that for every unusual vehicle financed, 2.31 old autos are financed. The make-up of old vehicle sales presentations that 35% of autos financed are beneath two years old, with demo devices making up 6% of old financed deals, which indicates an ongoing preference for older autos while rigidity on disposable earnings remains.
“The percentage of cars (unusual and old) being financed beneath R200 000, R200 000 to R300 000 and over R300 000 saw a clear motion out of the beneath R200 000 bracket towards autos in the R200 000-R300 000 bracket. This displays the fact that as inflation drives unusual car prices up, there may be a greater demand for old autos, which in turn drives old vehicle prices up as properly,” commented TranUnion.
Correct news for exports
South African vehicle export market, on the opposite hand, is forecast to recuperate in step with the global financial system. Whereas total exports declined 30% from 2019 to 2020, here’s anticipated to pattern with the COVID-19 waves, which is the ideally suited underlying factor impacting demand accurate now.
Ask industry changes in 2021
Where 2020 was a time of ‘conserving the lights on’ for many dealers and industry players, Reddy believes the theme for 2021 will shift more to refocusing and restoration as the industry appears to be like to be to adapt to unusual procuring for patterns and buyer behaviours.
This comprises repurposing local manufacturing plants to satisfy the rising demand for electrical autos, and dealers taking a seek to digital instruments to transform the procuring for and selling skills for buyers.
“Here’s a hard time for dealers, and 2021 will detached be a challenging year. We are assured that we’re going to be able to contemplate an increase in vehicle sales over 2020, however the real reference will be how fleet we can recuperate to 2019 stages,” said Reddy.
South Africa’s vehicle manufacturers’ representative physique The National Association of Automobile Manufacturers of South Africa (Naamsa), properly-known a year-on-year decline of 19.8% in unusual passenger autos from Q4 2019 to Q4 2020.