Under Pressure to Trade Down Vehicles

The nationwide lockdown has had a negative impact and threatens the financial health of 65% of South African car buying consumers.

About 30% need to replace their vehicle within the next month. At the moment, car dealerships are not open for retail, but there is compelling evidence for them to trade under level 4 of lockdown according to George Mienie, chief executive officer of AutoTrader. 

He went on to say that with salary cuts and with consumers losing their jobs, they are showing an urgent need to free up cash or reduce their monthly bills. The search for vehicles under R50 000 have increased by almost 300% compared to pre-lockdown levels. This shows that South Africans are feeling the pressure and are worried about how they will feed their families. 

Mienie said that based on the consumer buying patterns pulled from AutoTrader data, South Africans are trading down across all the categories, even high level income consumers. 

According to anecdotal feedback from dealers that trade using AutoTrader, motorists are trading down from a R730 000 BMW X5 50D to a R500 000 BMW 520d. They are trading down from a R670 000 Mercedes-Benz ML63 to a R300 000 Mercedes-Benz C180. As well as trading down from a R335 000 Ford Ranger to a R160 000 Nissan NP200.

In the first week of May, specific lockdown buying patterns were established through the use of a survey on the platform. 

Mienie said that they have established that 30% of consumers are under pressure to replace their vehicle in the coming weeks. In order to avoid further financial implications for both consumers and dealers the pipeline needs to be managed. It is a case of the sooner the better, as the sooner consumers can trade with dealerships the sooner the financial pressures can be eased. 

It was expected that from May 4th, dealerships would be open to trade and on that day, there was a spike in website traffic. Compared to pre-lockdown levels, vehicle dealership enquires have increased by more than 150%. 

However, the doors are still not open as dealerships are waiting for specific directions from government so that they can start dealing. It is in the best interest of the South African consumer for this to happen soon. 

The government will also need to include independent dealerships as these fall into small to medium enterprise category and are probably the sector currently at risk. Also, used car sales outnumber new car sales by 2:1. 

In order for the proper functioning of the supply chain, all supporting infrastructure will need to operate from vehicle sales, to licence departments, to testing stations to roadworthy centres so that ownership can be transferred from the dealerships to the buyer can be completed under level 4. 

Article Source: https://businesstech.co.za/news/motoring/395553/south-africans-are-trading-down-on-their-vehicles/