Serious problems with Chinese cars in South Africa

Chinese cars have rapidly increased in popularity in South Africa over the past few years, with brands from the Asian country working their way into the top ten most sold.

However, this has not come without its problems. Many Chinese brands lack an adequate dealership network, have poor drive quality, are heavy on fuel, and are unproven in South Africa. 

This is feedback from AutoTrader’s Sean Nurse, who outlined some of the key trends in South Africa’s automotive sector following the release of the company’s Car Industry Report for 2024. 

The report showed that 2024 was one of the most tumultuous years for South Africa’s car industry, with new entrants disrupting established brands and increasing focus on the sustainability of local manufacturing. 

In particular, the most significant shift was from consumers who continued the hunt for value, engaging in buying down instead of upgrading and increasingly looking to cheap Asian brands for new vehicles. 

Suzuki, GWM (Haval), and Chery have been the main beneficiaries of this trend, with other Asian brands also capitalising on lower manufacturing costs in India and China. 

Suzuki was one of the first brands to capitalises on this trend by moving much of its manufacturing to India to make its cars more price-competitive. 

Chinese brands have grown significantly in South Africa, challenging established European, Japanese, and Korean marques for market share. 

Overall, used car searches for Chinese vehicles increased by 112% last year, with Omoda seeing a remarkable 197% increase in consumer interest. 

Advert views on AutoTrader for Chinese vehicles also increased by 88%, while enquiries rose by 183%, suggesting strong consumer intent. 

Chinese brands saw a +92% sales increase in the used car market, while used car sales decreased by 2%.

Some of South Africa’s biggest banks, including Standard Bank and Nedbank’s MFC division, have flagged increased demand for Chinese vehicles. 

Haval’s sales have surged from 428 vehicles in 2014 to 18,962 in 2024. It now sells over 1,500 cars a month in South Africa. 

Since re-entering the South African market in 2022, Chery’s sales have doubled from 8,013 vehicles to over 16,000. It, too, now sells over 1,500 cars a month in the country.

Nurse told Investec’s Everything Counts podcast that there are major problems with South Africa’s rapid shift towards Chinese vehicles. 

Chinese brands’ most significant challenge is their lack of an adequate dealership network to service South African customers. 

Nurse estimated that a company needs around 50 dealerships around the country to properly service South Africans with aftermarket offerings and parts. 

Nedbank’s MFC, the largest financier of vehicles in South Africa, also flagged this as a potential drawback in the growth of Chinese vehicles in South Africa. 

It said Chinese brands must invest heavily in after-sales services and customer support as they lag behind competitors in this area. 

Another major issue for Chinese brands in South Africa is their perceived lack of reliability, as they are not yet proven in the country. 

Nurse compared this to when Hyundai and Kia first came to South Africa over a decade ago, with it taking many years to shift people’s perceptions of Korean cars. 

These brands, alongside Japanese competitors, have built a reputation for producing very reliable vehicles and having a miniscule warranty burn rate. 

This, coupled with parts availability, is crucial for consumers to have peace of mind with regard to vehicles from these brands. 

Nurse gave the example of Mitsubishi, which has a 0.0036% warranty burn rate in South Africa. “That is almost negligible. These cars do not break.” 

“I would love to see the warranty burn rate for the new Chinese vehicles in South Africa. The Chinese cars are not proven yet. I cannot tell you what a Chinese car will be like in ten years,” Nurse said. 

Chinese brands are also facing increased competition, partly of their own making. The success of Haval and Chery has resulted in many more brands pouring into South Africa. 

“We are at the point now of there being an oversaturation of these Chinese brands. There are a few that are established, but many are not,” Nurse said. 

This oversaturation is evident in CMH’s financial results, one of the country’s largest importers and distributors of vehicles. 

While Chery and Haval are big enough to survive swings in market share, newer Chinese brands do not have that luxury. 

These two brands are eating each other’s sales. CMH noted in a presentation to analysts late last year that sales of Chery vehicles continue to be strong, growing their market share by 50%. 

However, Haval’s market share had declined by 11%. CMH said it had lost market share to Chery in the year to May.

This indicates that the rapid growth of Chinese brands within a stagnant market has resulted in them eating into each others’ market share.