Technical recession is not bad news at all

Last week it was announced that South Africa is now in a “technical recession” and its citizens have reacted with panic.

However when it comes to the South African automotive Industry as a whole a technical recession is not all doom and gloom.

According to AutoTrader CEO George Mienie, the local component manufacturers that are exporting will benefit from the weaker rand.

“We have a strong component industry here in South Africa. Catalytic converters have typically been the number one export (catalytic converters to the value of R18.7 billion were exported last year) but engine parts, tyres and engines are exported too,” he reveals.

Original equipment manufacturers (OEMs) could also benefit from this situation.

“We have a large and vibrant vehicle manufacturing industry. Companies such as Isuzu, BMW, Ford, Mercedes-Benz, Nissan, Volkswagen and Toyota all build cars here. Vehicle exports are predicted to grow to 384 000 units next year (from an expected 340 000 this year), and a weaker rand is obviously good news for exporters,” he explains.

However, while the weaker currency is good news for exporters, the downside is that the prices of imported components and vehicles will rise.

But Mienie says that this could present a unique opportunity to used car buyers right now.

“We’ve seen that used car prices only increase about six months after new cars. Accordingly, if new car prices rise by 10% within the next month or two, used car prices will only rise by the same percentage about six months later. This means that used car buyers can get good value in the used car market right now. This is especially the case in top-end cars (vehicles costing over R500 000),” he says.

While Mienie understands the concern surrounding the recent recession announcement, he believes the motor industry will survive the current crisis.

“The simple fact is that South Africans will always need wheels. We don’t have a widespread train or tram network. Maybe we will need to tighten our belts, purchase a used instead of new, buy down or hang onto our vehicles for longer (which will have positive spinoffs for service stations)’’ he concludes.

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