VPI Q1 2018 Results
This year the automotive industry has had major changes in their environment with VAT increases and ad valorem tax. The South African financial markets has reacted positively with a decline in interest rates on the back of the decision by Moody’s to retain South Africa’s international and domestic credit rating at investment grade. The improvement of the automotive industry has been credited to the lower inflation rate, decrease in interest rates and strengthening of the rand, which allowed the manufacturers to slow down on new price increases. The new vehicle price increases has been overtaken by used vehicle prices which has been indicative to the demand switch from used to new.
We expect the VPI trend to continue into the next quarter with modest increases in volume for new and used vehicles. The positive exchange rate should ideally keep the input costs down which will keep the price increases low although the increase in VAT will lessen the positive impact.
Overall, the automotive industry has a positive outlook for 2018 with the economic impact being the driver of this.
"We are coming off a low base and are hovering around 600,000-650,000 new cars being sold a year, so we are still trying to get back to 2007 levels and clearly still have a long way to go despite all the positives. However, we probably saw a bottom in the vehicle market some time in 2017 and this sector is now on the rise, specifically in the new vehicle space"
Kriben Reddy, Senior Director, Head of Auto Information Solutions
Q1 2018 Vehicle Asset Finance Results
The percentage of cars (new and used) being financed below R200 000 has remained consistent to last quarters numbers with 43% in Q1. This has shown a marginal increase in used car loans which has being consistent at around R242k. This indicates a shifting emphasis on the value proposition that consumers place on their vehicles, as they look for the maximum amount of value from a car. This further emphasizes the shift to new, which is shown by the decrease in the used to new ratio. The marginal price increases in new vehicles have kept the finance values consistent over the last three quarters.
VPI Q1 2018: Insights
Unpack the most important facts, findings and insights held in this quarter’s infographic. Download our latest version here.