Used car sales data adds insight to the automotive industry. While used car sales in South Africa dwarfs new car sale, new car sales are an important feeder to the used car retail market place. I was recently joined by Mike Mabasa, Naamsa CEO, and Richard Rice, Kantar Business Development Director, to speak about the future of the automotive industry. Not only from the AutoTrader car industry report and the data it contains, but also from an SA manufacturing perspective of electric cars.
Future decisions rely on used car data
According to Mike Mabasa, the latest instalment of the AutoTrader Car Industry report is perceived as one that will help make decisions in the future for the automotive industry. It’s unique and fresh perspective offers something different in comparison to what is currently in the market, giving a sense of what’s happening in other areas of the automotive value chain. The beauty of such a report now that it’s all derived from digital insights, making it easier to capture interactions as they happen, unlike in the print days.
As NAAMSA is a policy driven organization, Mike Mabasa views reports of this nature as being used in conjunction with key policy discussions with government, to ensure any shifts made to existing policies are based on data and insights we have in hand.
New car & used car industries come together
Whilst the automotive industry, both used car and new car, are comprised of many moving parts it’s interesting to note that some may operate in isolation without understanding fully the dynamics on the ground.
Using the data derived from over 401 million searches conducted in the past year on AutoTrader, it’s in reports of this nature that unpack car buying consumer dynamics to other areas of automotive such as retail and third-party suppliers. Our automotive industry contributes 7% to South Africa’s GDP, with 2.5% from retail; it’s evident that reports of this nature supplement automotive retail nicely.
Used car data reveals the consumer’s changing views
Richard Rice says used car data has revealed the consumer’s changing views in more ways than one and it is for this reason that it’s important for car dealerships to build their reputation and brand as it is a constant fight for a share of the pie.
He also thinks that the very fact that most transactions are happening online doesn’t change the fact that the automotive space is very complex, which is why Richard refers to ‘clicks to bricks’ – so you may click into many places online, car buying consumers still need car dealerships as fulfilment centres.
It would be interesting to see how this consumer behaviour changes. I’m inclined to think that the world has changed permanently for the foreseeable future with search trends having shifted.
New car market is facing two cold fronts
Whilst Mike Mabasa agrees that the new car market is facing two cold fronts at the moment, he also acknowledges that in the near future, life will no longer be the same again – even post the COVID-19 pandemic. We as an industry have learnt a few valuable lessons. For example, we’ve seen that:
- Only 39% of the components we have in our vehicles that are produced locally, those components are manufactured here in South Africa. What COVID-19 has taught us what we can no longer afford as a country and automotive industry.
- Some vehicle manufacturers are facing challenges of not being able to bring certain components into the country. And some of them had to also reach out for a lot of their value chain and suppliers because we relied heavily on China and Europe.
These and other challenges have imprinted on us the importance of localization of vehicle production.
The other issue the new car space has faced is a steady decline in terms of deman. This has been consistent over the last 7 years, evident in the AutoTrader car industry report reminds us that the shift to used car sales is a reality and obvious. The question is how do we start to re-stimulate the demand of new car sales in South Africa. One very obvious way is to look, with government, for ways to reduce certain costs as up to 42% of the retail price on cars goes to taxes.
The COVID-19 pandemic has made it even more difficult for consumers to buy cars as disposable income is under pressure even though the reserve bank has reduced the interest rates by 300 basis points since the beginning of the year. Non the less, car buying consumers cannot afford to buy a brand-new car in South Africa because they are expensive.
While the swing to used car is quite prominent, this is not sustainable, there’s an inherent risk in a swing to used car, which is an ageing fleet in the South Africa – which we can’t have. Because the older the vehicle fleet is, the less those vehicles are of use overtime.
So, stimulating new car sales is imperative for the automotive industry as a whole.
Are there tax incentives for electric cars in South Africa?
The short answer is – no. There are currently no tax rebates or incentives in South Africa for electric cars. This is what’s making them unaffordable for most South Africans.
The AutoTrader Car Industry report shows a demand for electric cars more so for cars that don’t exist like the BMW 3 Series. There is search evidence that the demand for electric cars is there, however when looking at the price of an electric vehicle, it becomes the biggest hurdle for electric car buying consumers – even though we know the future is “electric vehicles”. As a matter of fact, to import an electric vehicle is more expensive than to import an ICE vehicle. This all comes down to:
- higher import taxes and other duties
- no government subsidies or incentives
I still believe that we have the technological capabilities to manufacture and assemble our own electric cars – we are a country of many possibilities, just look at recent history:
- Brad Binder, a South African booitjie that won the MotoGP recently,
- Elon Musk who has built the most valuable car company in the world.
Global car-ownership trends
Whilst global car ownership trends continue to change from owning a car to “car usership” like renting, to ride hailing services etc, in South Africa there are two fundamental issues when it comes to owning a car or the demand for cars:
- cars are seen as a status symbol, a sign of success
- South Africa has a less reliable to non existent public transport infrastructure
- South Africa is a vast country (the UK fits into SA 5 times), public transport infrastructure would be difficult and costly to build between cities
All this means we are, and will be into the future, a “car driving” nation and are reliant more and more on cars.
A recent consumer study conducted by Google (see the latest AutoTrader car industry report for details) speaks to the fact that people feel safe in their cars i.e. choosing to travel by road versus traveling via aircraft or via public transport to go on holiday potentially in the future is going to be something done with your vehicle. There is a lower risks of contracting a virus on route versus in an aircraft.
South African automotive retail is committed to accelerate change
Mike Mabasa concludes to say that the South African automotive industry is committed to accelerating the change, but are we really changing fast enough to capture the change to:
- Stimulate new car sales
- Stimulate the change to electric cars?
But, in many ways, we will be forced to change, it’s not something that OEM’s may aim to change at their own pace. For example: the adoption of electric vehicles globally will force South Africa to change.
With many countries overseas already no longer accepting our internal combustion engines in the future, by putting very stringent environmental measures targets in place (carbon emission, etc), so to will the South African automotive manufacturers be forced to innovate – even faster to be able to move into electric vehicles. Tallied with this evolution, is the need to support the change with the right electric car infrastructure in South Africa.
I’ve driven a couple of electric cars:
- The BMWi3,
- and the Jaguar iPace.
I would agree that the electric charging infrastructure in the country is an extremely important component. These cars don’t charge in under 12 hours at home.
Who’s in control of car sales in South Africa?
In decades gone by, businesses designed and manufactured their products which they would push onto consumers; and it was no different in the car industry in the past where a designer would come up with a design and that car would be manufactured and pushed onto the consumer.
I’m not saying that the consumer wasn’t involved, but in the world we are toward, a world of consumer transparency, the car buying consumer is now more in control of demand that ever before.
It is therefore not just about the “service” your business gives, it’s more about how transparent you are with the consumer that builds trust. Consumers are looking for trust and confidence because that builds confidence. Today’s car buyer will catch you out very quickly because information is available online and the marketers and the brands who use transparency best are able to fit that whole ecosystem together and match their brand and product to their customer.
The same applies to used cars where consumers are not just buying a car, they’re buying history. As a car dealership it is important that car sales are conducted in a transparent manner all the time.
Being transparent especially with data is important for the automotive industry, with many automotive businesses sitting on massive amounts of data that is undocumented or shared – now is the time to make such information available publicly.
This makes it easy for car buying consumers to make more informed decisions especially if they know more about vehicles in the market.
This is good for the car buyer and ultimately good for the whole industry.