South African new vehicle prices rose at nearly three times the general inflation rate during the first quarter of 2021. This is according to the latest Vehicle Pricing Index (VPI) that was released by TransUnion this week.
The first quarter VPI rose to 8.8 percent, versus 4.0 percent during the same period of 2020, although it is down from the 9.6 percent recorded in the fourth quarter of last year. Consumer Price Inflation (CPI) was recorded at 3.1 percent during Q1 2021.
“New vehicle price increases are above inflation and we expect this to increase further in the upcoming months,” TransUnion said.
However an upside is that purchasing power appears to be improving, with figures from financial institutions showing that more buyers are moving from the sub-R200 000 bracket into the R200 000 to R300 000 price range.
However, demand patterns are expected to continue shifting from new to used vehicles as prices rise in real terms. For the record the first quarter Vehicle Price Index for used vehicles stood at 3.7 percent, versus 1.4 percent a year earlier.
Transunion vice president Kriben Reddy believes that low interest rates and lower general inflation will not be sufficient to turn the tide back towards new car purchases, and the resulting demand for used options will put pressure on those prices too.
“Overall, the automotive industry has had another challenging quarter, with unemployment rate increases, negative exchange impact, negative annualised GDP growth rate and further pressure on disposable income resulting in low consumer confidence,” Reddy said.
“This is a tough time for dealers, but we do expect consumers to start re-entering the new vehicle market once the industry adopts ‘right to repair’ laws later this year”.
According to TransUnion, The Vehicle Price Index measures the relationship between the increase in pricing of new and used vehicles from a basket of options that includes 15 volume-selling car brands.
