Allowing new and used dealer networks to trade will take the pressure off anxious South African vehicle owners.
Data is driving our modern world, and nowhere has this been more impactful than Covid-19.
As the government attempts to navigate South Africa back to an economic recovery of some sort, various industries are presenting their case. For the automotive retailing business, the data numbers have been severe.
South Africa's domestic new car market suffered a near 98% collapse in trading volumes last month. This was predictable, but the sheer weight of data is inarguable. What is even more concerning is that the new car sales channel does not account for most of South Africa's vehicle transactions.
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Used vehicles, mostly retailed through independent dealerships, represent more than double the conventional new car sales volume. As vehicle owners face dwindling incomes, the reality is that many are experiencing an urgency in trading-down, and used vehicle dealers are the service points most capable of processing those transactions.
The new cheap
Search data provided by AutoTrader shows some alarming realities. The online used vehicle portal saw a 300% increase in searches for vehicles under R50 000, in April. That is a dramatic change in consumer search behaviour and a sure indication that the concept of vehicle ‘affordability’ is going to be radically reformulated during 2020.
For South Africans who are feeling pressured by their current vehicle debt and wishing to trade into something cheaper, without completely compromising their mobility or ability to function in a restarted economy, it is vital having dealerships open.
As more time passes with indebted customers being squeezed by vehicle debt, the more needless anxiety this lockdown generates. If both new and used dealerships are certified to trade freely, the market will find some new balance of equilibrium and vehicle owners will be allowed the relief of disengaging with unaffordable vehicle payments.
Image: Wheels24 / Charlen Raymond
Premium feeling the pinch
Nowhere is the pressure more evident than in premium vehicles. Some trade examples provided by dealerships show the determination of South Africa to buy-down.
A customer with an X5 30d, valued at R730 000, wishes to trade into a 520d, retailing for R500 000. Luxury SUVs might lose a lot of appeal. An ML63 owner, with his vehicle worth R670 000, wanted to get into a R300 000 C180 sedan.
South Africa's robust bakkie market could also see significant realignment. One dealer fielded the example of a Ford Ranger owners, with his bakkie calculated to be worth R335 000, would like to buy-down into a Nissan NP200, at R160 000.
A third of South Africans surveyed by AutoTrader's digital research indicated that they are under pressure to trade their current vehicle within a month. An even more illustrative statistic is that two-thirds of respondents confirmed the lockdown had negatively impacted their income.
The reality is that South Africans want to keep mobile and retain the function of vehicle ownership, but at a more affordable rate. And that means exchanging what they have, for something smaller and cheaper.