South Africa

South Africans dump Mercedes and BMW for cheaper Chinese cars

Rich South Africans are starting to feel severe financial pain, which is putting pressure on the sale of premium cars and, in particular, luxury German brands such as Mercedes-Benz, BMW, and Audi. 

This decline comes as middle-class South Africans rack up higher debt levels, which, when coupled with high interest rates, take up a larger portion of their disposable income. 

Elevated interest rates also make buying a new car more expensive as the repayments on auto loans have increased as the Reserve Bank has hiked rates. 

The Reserve Bank has raised interest rates to their highest level in over a decade and 475 basis points higher than pre-pandemic. 

This has put relatively wealthy South Africans, who are used to buying a new car every five years, under tremendous strain. 

The DebtBusters Debt Index for the first quarter of 2024 showed that South Africans earning over R20,000 per month are seeing their debt levels shoot up. 

It also showed that debt repayments have hit record highs due to rising debt levels and high interest rates. Households now spend two-thirds of their income paying off debt.

DebtBusters said the debt-to-income ratio for people taking home more than R20,000 per month is 127%, while it is 172% for those earning R35,000 or more. These ratios are at or close to the highest ever.

“What is concerning is that for people earning R35,000 and more, unsecured debt levels are 41% higher,” the company said.

“This is in line with inflation and indicates that without meaningful salary increases, these consumers are using debt to supplement their income.”

This is a major factor in preventing South Africans from being able to purchase luxury vehicles, with German brands particularly hard hit. 

The sale of Audi vehicles, for example, has declined from 18,375 in 2014 to a mere 6,259 in 2023. 

Mercedes-Benz, BMW and BMW-owned Mini have not fared much better, with only Porsche bucking the trend and growing its sales. 

Earlier this year, Daily Investor contacted Audi, Mercedes-Benz, and BMW to find out why they think their car sales have more than halved in the past decade. 

BMW said it is not the only manufacturer affected by the rising cost of living. The overall passenger car market has contracted in the past ten years. 

It explained that, due to the tough economic environment, a new trend of buying down has emerged in the new car market. 

In other words, South Africans can no longer afford premium vehicles and are looking for cheaper alternatives or not buying a new car. 

Combined with increased imported vehicles from Asia, consumers have been spoilt for choice. 

Audi also said that one should look at the decline in sales in the wider premium market and passenger car sales in general. 

Despite the decline in sales, it said it has managed to maintain and, in some years, increase its market share. 

It also explained that some South Africans are waiting longer to upgrade their cars, waiting seven or eight years rather than the typical five years before buying a new car. 

The buying-down trend can be seen in the strong growth of sales from cheaper brands such as Suzuki, Haval, and Chery. 

Suzuki, in particular, has seen immense growth in the past decade, with sales of their vehicles growing from 6,402 to 47,201. 

Haval and Chery have seen similar growth, with Chery selling over 16,000 cars last year compared to 1,297 in 2014. 


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