During September last year we published an article that attempted to preview the effect that the sliding Rand would have on new car prices. At the time, it read like a horror story. Seems as if the sequel will be even more horrifying…
At the time of the original article, the Rand had devalued to the Dollar by just over 20% in a year, and most manufacturers/exporters predicted quarterly price increases of between 2,0 and 5,0%, while some importers expected short-term increases of closer to 8%. With the benefit of hindsight, these predicted increases now seem conservative. At the time, most global predictions were that the Rand would stay in the R13,50-to-R13,80 band to the Dollar.
Instead… the wheels came off.
Since September last year the Rand has been thumped by numerous developments including, of course, the controversial decision to replace a respected Finance Minister with a relative unknown, albeit briefly… Whereas the Rand was hovering around R13,30 to the Dollar late in September 2015, it is currently sitting at around R16,80.
The impact on new car prices will therefore be heightened and accelerated. We spoke to several senior representatives from leading South African car companies, and increases of up to 20% for the remainder of the year is not out of the question. One importer says increases of 5% per quarter are likely, a sentiment echoed by others in the industry as well.
Those that manufacture locally and have healthy export programmes, however, believe that the market won’t be able to stomach such a big increase and that increases of around 10%, just a few points above real inflation, are to be expected. Even so, the same manufacturer/exporter believes that the market would decline by about 8%. Bigger price increases and a further weakening of the Rand will cause further serious damage.
What does this mean for the consumer?
Manufacturers and importers have already started the year with several price increases, and more is to be expected in the coming months. If you were planning to buy a new car during 2016, then keep in mind that you may no longer be able to buy exactly the same model/specification that you had in mind. Several other economic factors are impacting household spend, and the interest rate is likely to move by several percentage points this year, according to motor industry insiders and economists. Consumers are cautioned to not over-extend themselves debt-wise.
So, shop carefully and consider buying trusted, more affordable products that will be cheaper to fuel, insure and maintain. The used car route is another consideration. Already used-car dealers are in a scramble for good-quality used vehicle stock, and judging by the growth in leads on Cars.co.za, demand is certainly on the up.
As always, don’t hesitate to get in touch with us for advice. It’s what we’re here for…
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