A look at the headlines around South Africa’s new car sales trends might lead one to believe that the country’s new vehicle market has been taken over entirely by a fresh wave of affordably priced and tech-laden Asian entrants.
“On the surface, this might seem to hold true,” says Brandon Cohen, Chairperson of the National Automobile Dealers’ Association (NADA). “We’ve just witnessed the strongest June performance in nearly two decades, dating back to 2007. In an environment still clawing its way through high interest rates and inflationary pressure, many observers have resolved to attribute this boom entirely to the rapid influx of budget-friendly Chinese brands. But this is not entirely the case.”
An analysis of what is actually happening on the showroom floors reveals a far more nuanced truth – one that is highly positive for the retail ecosystem and reassuring for everyone, including the legacy brands that have anchored the domestic economy for decades.
Legacy Brands Remain Relevant
“Let’s look at the numbers before we declare a complete regime change,” urges Cohen. “Yes, newer entrants are expanding their footprints at a breakneck pace and scoring highly impressive volumes. But they are not replacing the traditional brands.
“Every month, the pinnacle of the new car sales charts remains dominated by legacy brands. Toyota remains the most dominant brand in terms of sales, posting a commanding 12,417 sales in June this year. Suzuki with 5,689 units sold, and Volkswagen with 5,613 fought a neck-and-neck battle for second, with Hyundai and Ford completing an incredibly robust top five with 2,986 and 2,961 units sold respectively. It’s clear that South African consumers still hold these established marques in high regard.”
Cohen also notes that this growth is highly encouraging because it is visible across all major vehicle segments. “The growth we are seeing is across the board – from passenger cars to light commercial vehicles (bakkies), heavy trucks, and buses. The driver behind the current market growth isn’t just a hunt for more affordable cars; it is a fundamental, positive shift in consumer psychology, spurred by a stable domestic political landscape and interventions that shielded locals to an extent from global oil price volatility.”
Evolving Dealership Ecosystem
Speaking on the impact on the local dealership network, Cohen dispels the view that the sheer volume of new brands entering the market and the growing adoption of multi-franchise dealership models spells doom for traditional showrooms and employment in the sector.
“Our observations show the exact opposite. This is not a story of retail elimination; it is one of evolution. The rise of multi-franchising is not a sign of weakness in the system. It is a pragmatic global trend. Sharing real estate and overhead costs optimises dealership functionality. Because the sweet spot of the market resides in vehicles priced under R400,000, these diversified floors are experiencing unprecedented consumer traffic. Rather than costing jobs, this structural shift is expanding the operational ecosystem, translating to high-volume sales opportunities for sales staff and finance managers alike.”
“But portfolio diversification is not a silver bullet,” cautions Cohen. “A dealership cannot survive on the margin of a new-car invoice alone. Long-term sustainability is built across the entire dealership, from excellent customer service and offering products, services and accessories that add value to the vehicle, to the workshop in the after-sales environment, comprising routine servicing, complex diagnostics, and factory warranty work. Dealerships that diversify will carefully weigh the risks associated with any new brand’s longevity and ask whether they can maintain the same high standard of parts supply, technical training, and customer care over a ten-year lifecycle that South Africans have come to expect.”
Intricate Waves in the Pre-Owned Space
Looking beyond the new car segment, Cohen notes that the surge of competitive new cars is actively reshaping the pre-owned vehicle market, creating noticeable pricing pressure in the R350,000 to R500,000 bracket.
“To keep used stock moving against fully warrantied new vehicles of a similar price point, the pre-owned sector is undergoing a broad-scale repricing structure,” says Cohen. “Additionally, because the premium segment has experienced significant ‘buying down’ over the last few years, we can anticipate a medium-to-long-term deficit in premium model trade-ins, which will restrict higher-end used stock in the future.”
A Stronger Industry for All
“Ultimately, the influx of new entrants has not been a complete revolution, but rather an evolution, marked by adaptation and innovation,” Cohen concludes. “With the track getting wider, the biggest winner is ultimately the South African consumer, who is spoilt for choice.”