75% of vehicles now above R500K

Online publication TopAuto recently conducted a survey of the South African new vehicle market and found that of the 1 481 models on sale, only 25% fall below the R500 000 mark.

This number includes passenger vehicles, and excludes medium and heavy commercial vehicles.

With 75% of new passenger vehicles priced from R500 000 upwards, and into the millions, Joe Average is left with very few options when out shopping for a new set of wheels.

But why have new cars become so expensive in South Africa?

According to TopAuto, new car prices have increased significantly over the last few years owing to several factors. These include inflation, supply chain disruptions, safety and legal requirements, and changing consumer preferences.

On the supply side, TopAuto reported that the Covid-19 pandemic caused a drop in demand for cars, which led to price hikes from most car brands to stay in business.

As countries began to lift their pandemic restrictions, consumer spending bounced back to pre-Covid levels.

However, many companies were still operating at a reduced output owing to worker layoffs and factory shutdowns.

This created a supply and demand imbalance for certain goods, including cars and their components, such as semiconductors, resulting in increased prices.

South African economic conditions exacerbate car import costs owing to high taxes, import duties and a weakening rand exchange rate.

A more long-term driver behind rising car prices are regulations, which vary from market to market but broadly entail the same things.

An example is safety equipment, which is a crucial component of modern cars.

In countries such as South Africa and the European Union, new cars must be equipped with features such as anti-lock brakes, airbags, parking sensors and cameras.

Additionally, consumer expectations have influenced the standard features in modern cars, which now commonly include infotainment touchscreens, air conditioning, cruise control, LED headlights and more.

However, incorporating these features into vehicles comes at a cost, and they are not cheap.

SUV craze

A less obvious trend has also led to increased prices, notably the sharp rise in popularity of the SUV body type.

Over the last decade, SUVs and their smaller crossover counterparts have become increasingly popular, resulting in a decline in the demand for more affordable hatchback and sedan styles.

Consequently, several hatchback and sedan models have been discontinued and replaced with new SUV models to meet the changing market demands.

One local example is the Ford Puma, which now sits as Ford’s entry-level passenger vehicle at a starting price of R569 900, following the discontinuation of the more affordable Fiesta and EcoSport.

TopAuto reached out to Ford South Africa to get more clarity on its newcomer’s price, which they provided, pointing to the target market and the exchange rate as the main determining factors.

It’s worth noting that high-end cars usually offer a wider range of models than affordable cars, making the price difference between the two categories seem even greater.

For instance, the Porsche 911 offers a massive selection of 31 models to choose from, the cheapest costing in the region of R2 158 000.

On the other hand, one of the most affordable hatchbacks in South Africa, the Suzuki Celerio, offers only three models to choose from, with a starting price of R188 900.

There are various reasons for this, but one of the main factors is that it is not practical or feasible for car manufacturers to create a wide range of mass-market models when only a few options are actually required.

However, for luxury brands, the price is less of a concern once you enter the multi-million rand bracket.

At this level, customers are less interested in the cost and more focused on finding a vehicle that meets their unique preferences.

Regardless of the circumstances, the outcome remains the same for South African drivers.

They are discovering that car prices are increasing faster than their salaries in real terms.

To put this into perspective, experts have estimated South Africans earn an average salary of R26 086 and can afford a car priced up to R222 000 (assuming you spend 25% of your monthly income on vehicle-related expenses).

This means over 75% of the cars on the market in South Africa are affordable only to those who earn more than double that of the average formally employed South African.

This is especially concerning when combined with the continued rise in the cost of living, including expenses such as food, petrol and other necessities.

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