South Africans dump BMW and Mercedes

South African motorists increasingly purchase cheaper Chinese vehicles over German luxury brands such as BMW, Mercedes, and Audi. 

Nedbank’s vehicle and asset finance division, MFC, said the rise of Chinese car brands is significantly shifting South Africa’s automotive market. 

The influx of these brands is reshaping the vehicle industry, offering consumers more choices and competitive pricing. 

In particular, MFC noted the rise of Chinese brands such as Chery, Haval, GWM, and BYD in South Africa. It said that by next year, around 20% of all new car sales will be Chinese. 

While traditional German luxury brands such as BMW, Mercedes, and Audi have been hard hit, these brands are competing across all market segments, from hatchbacks to luxury SUVs and electric vehicles (EVs). 

For example, GWM-owned Haval is growing strongly with its range of SUVs, while BYD has introduced affordable EVs like the Dolphin. 

MFC said the major attraction of Chinese vehicles is their competitive pricing. They offer high-quality vehicles at lower prices than traditional Western and Japanese brands. 

This affordability is particularly appealing in South Africa’s difficult economic environment, with many consumers searching for value. 

While Chinese brands are also very affordable, they are often also competitive in terms of technology and luxury. 

Many incorporate advanced features into their vehicles, such as autonomous driving capabilities, connectivity, and enhanced safety features. 

MFC expects Chinese brands to continue to continue to grow in South Africa as they release more models and expand their dealership networks. 

However, these brands still face a challenge with building trust in their vehicles, with their future growth highly dependent on overcoming perceptions of low build quality. 

Chinese brands need to invest heavily in their after-sales services and customer support to ensure their long-term success.

At the same that Chinese brands have been on the rise, traditional German luxury brands have come under immense pressure in South Africa. 

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. 

Richer South Africans have slowed their purchase of new vehicles, with some preferring to ‘buy down’ rather than upgrade their cars. 

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

These are significant factors in preventing people from purchasing luxury vehicles, as even middle-class South Africans are being priced out of the market. 

German brands, particularly BMW, Mercedes, and Audi, have been hard hit. The sales of their vehicles have plummeted over the past decade. 

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

BMW and Mercedes have not fared much better, with only VW-owned Porsche bucking the trend and growing its sales in the past decade. 

These declining sales are shown in the graph below. 

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.