Experts upbeat on SA auto sector
01 November 2012 IOL Motoring Staff
South Africa's motor industry is under pressure from the high cost of fuel, the unfavourable exchange rate, labour unrest and the potential for political instability - but forecasts for sales growth are still positive.
This emerged from the Future Group's automotive panel discussion on Thursday, chaired by TV personality Jeremy Maggs, with panellists Brian Smith of Renault South Africa, Derik Scorer, chairman of the National Automobile Dealers' Association, Keith Watson (Standard Bank Vehicle and Asset Finance) and Roland Reid, marketing director for Jaguar Land Rover SA.
To the first question - whether or not South Africa's vehicles were over-priced - the panel replied that car prices had actually fallen when compared to the country's inflation rate over the past four years.
Which neatly sidestepped the actual question, which was why it was possible to build a car in South Africa, ship it overseas and sell it for less than the retail price in South Africa.
COST OF OWNERSHIP
But Scorer added: “With interest rates moving down as they have over the past three years, and the introduction of the National Credit Act in 2007, customers can look forward to the actual cost of ownership being considerably reduced.”
Scorer also noted that the industry's major players, both importers and manufacturers, had made significant efforts to include service and maintenance plans as part of new car deals, upping value.
When challenged that even budget vehicles were unaffordable to the common South African, Reid pointed out that the common South African had neither a job nor an education, so any discussion about the automotive industry involved only that fraction of the population able to finance vehicles.
He conceded that affordability was always a key issue, but insisted that aspiration was by far the dominant factor in purchasing decisions.
“Fewer people at the top end of the market finance their vehicles.”
“These are people with disposable income who can just write a cheque,” he said.
Scorer chipped in that during August 2012, Porsche had sold 261 vehicles through its three South African dealerships - mostly expensive Cayenne models, not the cheaper Boxster.
Similarly, Smith pointed out that 60 percent of Renault Sandero sales in South Africa of the most expensive derivative, the Sandero Stepway, underlining the importance of aspiration, even at the budget end of the market.
In response to a question from the floor regarding vehicle leases, a particular aspect of South African car culture came to the fore.
“A typical customer has an obsession with ownership,” Smith said: “They believe they'll make money when it comes to re-selling the car.”
Reid agreed that to change this perception would take time. The only scenario in which South Africans were receptive to vehicle leasing, he said, was when shopping for company cars with their car allowance.
SOME COSTS BEYOND INDUSTRY CONTROL
Extraneous cost-of-ownership problems included the fuel price, the fluctuating exchange rate and the looming possibility of e-tolling, although panellists agreed that the fuel-levy approach of the Opposition to Urban Tolling Alliance had their support.
Reid said that although South Africans were becoming increasingly eco-conscious, price was still the primary concern in a vehicle purchase.
“Alternative-fuel vehicles are still too expensive.”
Watson said that in his experience buying decisions were purely aspirational, with vehicles' carbon emissions having no impact at all.
The panel agreed that the government's 'green tax' - based on the amount of CO2 emissions a vehicle produced - had little effect on purchasing behaviour. Scorer said incentives for customers to buy low-emissions vehicles would be more effective than further punitive taxes.
Electric vehicles, he added, got a lot of international focus, but he insisted their popularity would remain low in South Africa given the size of the country and the cost of the recharging infrastructure, although he speculated that extended-range such as the Chevrolet Volt could find a limited market.
Nevertheless the panel agreed that the future looked bright for the South African automotive industry. Scorer predicted 10 percent growth in 2012 compared to 211, while Watson forecast 5-8 percent growth in 2013, despite the risks posed by the oil price and possible political instability following the ANC conference in Mangaung.
