The saying that one man’s meat is another man’s poison gains massive traction in today’s South African automotive environment. This came home to me whilst reading a recent press release from WesBank, which shows an interesting trend towards second-hand cars.
According to Rudolf Mahoney, head of research at WesBank, the ratio of funding for second-hand cars compared with new cars has been rising. A year ago, the bank was financing 1.2 used cars for every one new car purchased, but that figure has risen to 1.34 cars for every new car – a 12% increase. In addition, Mahoney says that over the past year, the number of applications for financing of used cars increased by 20% compared with only a 5% increase in financing for new cars.
Of course, price is the major factor. The press release states that the latest TransUnion Vehicle Pricing Index reveals that the price of new cars has increased by about 7.63%, partly due to a weaker rand, which increases the cost of imported cars, while used car prices have increased well below inflation at about 1.67%. And of course, the cost of keeping a car on the road is also becoming a factor for motorists. WesBank’s figures show that motorists who want to buy a new car are extending their repayment period to make the car more affordable. The average car finance deal sits at around 69 months. Wow, that figure is really a mouthful, particularly when one considers that the price of food is also rising dramatically.
So where does the silver lining come in with this scenario? It is in the automotive aftermarket. With new vehicle sales in 2016 down some 10% against 2015, and used car sales increasing, this can only be good news for the guys selling parts. An aging car parc means that people have to spend more on maintenance. It is a simple equation that has stood the test of time. In my 45 years in the industry, I have seen this happen time and again, and it is a constant, and nothing in the foreseeable future is going to change it.
In the following year or two or three, the focus of the South African aftermarket industry must be an intensification of effort on parts availability, range expansion, and technical support. I am aware that many of the aftermarket companies have been doing this for many years, but now is the time to allocate even more resources to ensure maximum benefit from the market realities. Another imperative is to educate the market on the importance of fitting quality branded product, and to go to great lengths in warning about the dangers of fitting “white box” product of unknown origin. Safety critical components are incredibly important when keeping our car parc in good roadworthy condition, and in reducing our appalling accident rates. For me, this reality came into stark focus over the recent long weekend, when coming home from a short stay in Mpumalanga I was stuck in the mother of all traffic jams, caused by two bad vehicle accidents, caused no doubt by bad driving and vehicles not in the peak of condition.
With the right strategy, component manufacturers can improve the health of our car parc, and at the same time, improve the health of their bottom lines. Business is literally on a plate, so feast accordingly.