- Spare parts prices ready to skyrocket due to the weakened rand
- New vehicle sales decline by 6.9 percent, according to NAAMSA
- What an average ‘parts basket’ will cost you today
Vehicle owners may be found wanting as the replacement costs on imported cars and spare parts are ready to skyrocket due to the weakened rand. The cracks are already showing. Massive increases have already surfaced and some believe it’s only a matter of time before the rand depreciation severely impacts on the vehicle market.
The South African vehicle market is currently poised on a knife’s edge. Our volatile economic situation is a direct result of an overnight devaluation in the exchange rate due in part to international pressure, but mostly to our own internal political shenanigans.
In December 2015, the South African economy took its worst hit in years when President Jacob Zuma announced the removal of finance minister Nhlanhla Nene following the news that Fitch downgraded South Africa’s credit rating to one level above junk.
Some say that an economic apocalypse was averted with the reinstatement of ex-finance minister, Pravin Gordhan. At this stage, South Africa’s economy was free falling into the abyss and the Rand had lost more than 25 percent in 2015.
At the time of writing, the currency stands at R22.39 to the British Pound and R16.15 to the US Dollar. This has created a domino effect as inflation rapidly escalated, forcing the Reserve Bank to hike the interest rate by 50 basis points in January 2016, and predicting a 11 percent food price inflation by the end of the year.
But some say a weak rand bring mixed blessings to the motor sector of South Africa. While automakers across the country are making the most of government’s export-focused automotive production, little of that growth comes immediately from the falling currency that makes cars cheaper in foreign showrooms.
But how are vehicle manufacturers able to cope with soaring vehicle import prices impacted by the falling rand? How about spare parts prices? How are manufacturers retaining customers?
We managed to get hold of an official motor vehicle parts price index that compares parts price increases over the last year for two common Hyundai vehicles. The increase in the weighted-average part price for the Hyundai iX35 amounted to 17.5 percent between January 2015 and January 2016 (with a 4.5 percent increase noted over the last month).
For the Hyundai Accent, there was an increase of 18 percent between January 2015 and January 2016 (with an 5.1 percent increase observed in the last 30 days). However, it should be noted that prices will vary dependant on whether the vehicle was produced locally or not.
New vehicle sales decline
The National Association of Automobile Manufacturers of South Africa (NAAMSA) reported that new vehicle sales saw a sharp decline in the first month of 2016, reflecting the current sentiment in South Africa’s economy. The overall industry was down 6.9 percent versus the same period last year.
“The decline in new vehicle sales comes as no surprise in the current economic climate, with consumer and business confidence at very low levels as a result of a number of macroeconomic factors,” said Simphiwe Nghona, CEO of Wesbank’s motor division.
He continued, “The spike in rental sales is an anomaly most likely due to rental companies choosing to re-fleet ahead of new car price increases. Despite this positive activity in the rental market, total industry sales still saw a decline”.
TransUnion, a company that provides information management services, reported that vehicle price inflation remains above consumer price index rates, although this is starting to decrease due to the declining market. “As three quarters of the vehicles sold in South Africa are imported, the affordability of these imported vehicles will continue to be a challenge for all manufacturers,” said a manufacturer.
THE PARTS BASKET
We’ve been monitoring the situation very closely. Simply put, the cost of a basket of parts from period January 2015 to January 2016 has been rising steadily over this period. We’ve selected the following items for our basket to illustrate the rising prices:
Vehicle: Hyundai iX35 2.0 Elite Special Edition 4×2
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