Inge Lamprecht
2 minute read
5 Nov 2013
6:00 am

New cars: A national obsession

Inge Lamprecht

For many South Africans, a car is not merely a transportation tool, it is a reflection of status.

Basically, a sign someone “has arrived”. Or not. However, practical considerations such as space and affordability are also driving growth in those segments of the car market that are booming.

The background

Following a devastating drop of almost 45% in new vehicle sales between 2006 and 2009, the last three years have seen a significant recovery and double-digit growth rates have become almost the norm.

The tide has, however, been turning for some time already, and figures released by the department of trade and industry (dti) on Friday show new vehicle sales have declined by 2.9% year-on-year in October.

Overall new vehicle sales are up 4.2% to 553 168 units in the year to date and industry commentators expect muted, if any growth for 2014.

Segmental analysis

An analysis of the total sales by segment in the year through October compared to the same period last year reveals interes-ting car-buying trends

Speaking at the Ford Motor Company of Southern Africa’s quarterly sales breakfast, Mark Kaufman, vice president of sales, marketing and service, said sales of sport utility vehicles (SUVs) have increased over 20%. Kaufman said the SUV body style offers the “spirit of adventure”, but also has enough space in the vehicle to travel and explore. An SUV allows for various configurations of second row seating and those with an active lifestyle would for example be able to transport a mountain bike and people at the same time.

These vehicles also allow for good visibility while driving, he said.

Entry level

At the same time, the Sub B segment, which comprises entry-level cars at competitive prices such as the Volkswagen Polo Vivo and Toyota Etios, has also grown 17.9% during this period. This market has experienced massive growth over the past few years – benefitting from a consumer trend to buy smaller, more fuel-efficient vehicles at highly competitive prices.

Moreover, various automotive companies have launched vehicles in the entry-level segment over the past three years, which supported growth.

Chris Hart, chief strategist at Investment Solutions, says due to the limitations of the public transport system in South Africa, the most aspirational item to buy is a motor vehicle, even before a house, because it changes the quality of someone’s life enormously if they can get around by car.

WesBank data suggests that there is still quite a degree of new buyers entering the vehicle market – South African families who have entered the lower middle-class and are now in a position to afford a vehicle.

Sales of the B and C segments have been slightly negative while that of D segment vehicles (very large sedans) have dropped more than 30% year-on-year in the year to date.