If the rand remained stable and interest rates low, car prices should decrease in real terms in the short to medium term, a director of KPMG Automotive claims. But Economist Tony Twine disagrees.

If the rand remained stable and interest rates low, car prices should decrease in real terms in the short to medium term, Fred von Eckardstein, a director of KPMG Automotive, has claimed. But Econometrix economist Tony Twine disagrees.

Von Eckardstein said the average increase in car prices of three per cent last year as opposed to inflation at between seven and eight per cent meant that cars had already become more affordable.

Speaking at a presentation of the 2004 Auto Executive survey, Von Eckardstein said it was essential that some of the motor industry development programme's (MIDP) export successes be converted into increasingly affordable local models. This would further help the MIDP to achieve its objectives of increasing the local vehicle market and improving affordability.

Senior manager for KPMG Automotive, Eric Ackroyd, said the continuing strength of the rand, global overcapacity and declining brand loyalty would benefit the local buyer, who was becoming increasingly hard-headed about price.

However, motor industry analyst and director of Econometrix Tony Twine described the KPMG analysis as "over simplistic" and "a terrible generalisation" in a report.

He said local prices would not decrease "as long as our market continues to fly a global market which is flat on its back".

But Von Eckardstein said consumers were to blame for car prices not declining.

"If they walk into a car showroom and ask for a discount, they are told to take a hike. They are very image conscious and tend to buy a brand whatever the cost, which is part of the reason prices don't come down," he said.

Von Eckardstein said there were 380 cars per 1 000 people in South Africa's white population, but only 30 cars per 1 000 in the black population. He said this discrepancy could not continue and that vehicle ownership could not be the privilege of whites in a post-apartheid South Africa.

He also said that guaranteed buy-back deals between motor manufacturers and car rental companies and large fleet owners posed another problem in price reductions.