[imagesource:pexels]

While many of us would be over the moon to have a Beamer parked out front, the reality is that fewer and fewer South Africans can afford to invest in high-end vehicles.

Luxury manufacturers, including BMW, Mercedes-Benz and Audi, admit they’re starting to feel the pinch as more consumers opt out of purchasing luxury vehicles due to financial strain. In addition, new Chinese-manufactured cars on the market have pushed consumers to forgo big brands in favour of cheaper offerings.

In the first quarter of 2024, total new vehicle sales decreased by a whopping 5.6% compared to the same period in 2023, and showed only a slight increase of 0.2% compared to the fourth quarter of 2023.

While there are many contributing factors to this steep decline, industry stakeholders and banks have pinpointed high interest rates and escalating fuel costs as two of the most significant reasons Saffas can no longer invest in pricey whips.

Record load shedding, stagnant salaries and 475 basis points in interest rate hikes have hammered South Africans over the last while, and wealthy locals are not immune to these challenges.

DebtBusters reported that in the first quarter of 2024, the debt-to-income ratio for individuals earning over R20 000 per month was 127%, and 172% for those earning upwards from R35 000. These ratios are close to their highest possible levels, with unsecured debt coming in at 41% higher for individuals earning R35 000 and more.

In light of these high ratios of debt-to-income, the National Automobile Dealers Association (NADA) has noted a trend of consumers downsizing and turning to the growing number of Asian brands, particularly Chinese brands, that are flooding vehicle markets with cheaply made, affordable transport options.

Over the past four years, popular Chinese brands like BAIC, Beijing, Chery, GWM, Haval, Jaecoo, and Omoda have surged from 7611 in 2020 to 30 850 in 2023, marking an impressive (and perhaps slightly concerning) 305% increase.

Haval and Chery have been the main drivers of this ‘buying down’ trend. Haval has sold approximately 19 904 units this financial year, representing an increase of over 2000% from the 872 recorded in 2019, and Chery has also seen very similar upticks in sales.

Of course, premium manufacturers like Audi, BMW, Mercedes-Benz and Volvo are not stoked, as consumers forgo these established brands to help maintain financial security in other areas.

BMW reflected on this shift in a press release, and acknowledged that its not only their brand that is seeing the devastating effects of rising cost of living across the globe.

“It [BMW] is not the only manufacturer affected by the increasing cost of living. The overall passenger car market has shrunk in the last ten years.”

Sales for Audi, Mercedes-Benz and BMW vehicles have more than halved over the last decade, declining from 71 889 in 2014 to 26 202 in 2023 – that’s a 63.5% decrease. Audi remains hopeful though, as the luxury brand has seen an increase in market shares over the last two years, despite the mainstream sales dip.

While some South Africans have decided to say goodbye to larney rides for good, others don’t want to give up hope on a new set of wheels and are now waiting longer to upgrade their cars, extending the typical five-year cycle to seven or eight years.

Eish, I guess we will have to resort to Janis Joplin’s old refrain of “Lord, won’t you buy me a Mercedes-Benz?” A regular paycheck just won’t cut it.

[source:businesstech]