In spite of small uptick in April, the SA new car market remains on the back foot.
Industry association NAAMSA hailed a very welcome 3,9% year-on-year increase in passenger vehicle sales in April 2019 but the year-to-date sector statistics are still down by 6%. And the benchmark Transunion Vehicle Pricing Index for Q1 2019 shows new passenger finance deals have decreased YoY by 10%.
As the new metal market goes off the boil, inevitably the second hand market has risen to fill the gap.
The Transunion data shows that the used-to-new ratio has increased from 2.09 in Q1 2018 to 2.13 in Q1 2019, although that number remains well short of the Q1 2017 number of 2.49.
This means that for every new vehicle sold in SA, finance houses are funding 2.13 second-hand vehicle sales in the quarter. In real terms that number is an under-reporting as it covers formal financing arrangements only and does not include the many private used car trades for cash.
In the second hand vehicle market, 35% of sales recorded by Transunion were for vehicles under two years old, and 10% were demo models, which indicates consumers are continuing to opt for “newer” previously owned cars. This is the contested space between the new and used car markets. In more bullish times, someone looking at a vehicle less than 24 months old would potentially be disposed towards an upsell into a brand new vehicle.
The good news for consumers is that Transunion’s Pricing Indices show that both new and used vehicles are becoming cheaper in real terms. New vehicles are up 2.3% and used vehicles only 1.9% - numbers that are well below a CPI of over 4%.
Interestingly, in the formal sector recorded by Transunion, brand sales are almost a mirror between new and previously-owned. The market share of the big four volume passenger vehicle manufacturers – Volkswagen, Toyota, Ford & Hyundai – virtually replicates itself in both sectors.
Volkswagen and Toyota between them carry 39% of new car finance volumes and 35% of used car volumes. The Gumtree Autos site – which carries many private sellers tells a similar story. Of the nearly 70,000 passenger vehicles listed, around 20,000 (or 29%) are either Volkswagens or Toyotas.
This means that buyers are playing it safe. When they buy a new car they have half an eye on its resale value and its resale value is driven in turn by the second hand buyers seeking the re-assurance of a big brand presence.
In an economy which officially has a meagre 1.5% growth rate, and which has very low confidence levels, it will be no surprise if SA car buyers continue for the rest of 2019 to prefer the value to be found in previously-owned vehicles to the seductions of a shiny new showroom model.