Trouble for BMW and Mercedes in South Africa

South African consumers are under severe financial pressure, and many are turning to more affordable car options, especially Chinese brands. 

In the first half of 2024, AutoTrader noted that new and used vehicle sales are demonstrating markedly different trends. 

The only commonality is that market share is growing for more affordable models, and sales for luxury vehicles are declining. 

A decline in the sales of luxury vehicles indicates that richer South Africans are also feeling immense financial pressure. 

In particular, elevated interest rates make purchasing a new car more expensive, preventing many from upgrading their cars and igniting a buying-down trend. 

This trend has negatively impacted popular German brands such as BMW, Mercedes, and Audi, with their sales declining over the past decade. 

In its Mid-Year Car Industry Report, AutoTrader noted that it does not expect this to end any time soon and expects interest in cheaper alternatives to pick up. 

Whether it be a shift from buying a new car to a used vehicle or buying down, luxury vehicle sales will remain under pressure for the foreseeable future. 

According to the report, 172,668 used cars were sold by the end of June 2024, an increase of 2.2% compared to 2023. 

In contrast, new cars achieved a total of 161,981 passenger cars sold by the end of June 2024. This is a decrease of -6.9% compared to 2023.

Within new car sales, South Africans are increasingly searching for cheaper alternatives, with Chinese brands and Suzuki rising in popularity. 

Suzuki has made an appearance in the list of the top 10 most-searched-for brands for the first time, replacing Porsche in 10th place. 

The Suzuki Swift is also a new entrant on the list of the top 10 most enquired models, edging out the Ford Fiesta in the process.

AutoTrader said consumers are voting with their wallets and are tempering their aspirations for luxury vehicles. 

This is set to continue a decade-long trend of South Africans abandoning luxury German brands for cheaper Asian alternatives. 

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 their sales more than halving in the same period. Porsche is the only exception, as it grew its sales over the past decade. 

Cars have simply become too expensive, AutoTrader’s research showed. The average listing price of a vehicle on its platform rose by 4.1% in the first half of 2024 to R445,181.

Suzuki has been a major beneficiary of this, with its sales skyrocketing in the past few years. However, recently, Chinese brands have begun displacing their German counterparts. 

AutoTrader’s research reveals that new versus used trends differ when it comes to Chinese brands, with South Africans being increasingly interested in purchasing new models rather than a used car.  

In the new car market, it is estimated that around 20% will be taken up by Chinese brands by the end of this year. 

Chinese brands have grown incredibly strongly since 2013, albeit off a low base. Haval-owner GWM’s sales, for example, grew from 1,004 cars in 2014 to 14,284 in 2023. 

Chery has seen a similar growth trajectory, selling over 16,000 cars in 2023 compared to 1,297 in 2014. 

Nedbank’s MFC, the largest vehicle financier in South Africa, explained this rise in their most recent report on the new and used vehicle markets. 

It said the influx of new Chinese brands has reshaped the country’s car market, offering consumers greater choice and lower prices. 

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). 

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.