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HomeMotoringIs South Africa’s used car market bubble about to burst?

Is South Africa’s used car market bubble about to burst?

Is South Africa’s used car market bubble about to burst?

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Johannesburg – The pandemic has changed the world in many ways, and its effects have reverberated right through the motor industry too, where a shortage of new cars has caused the used car market to flourish in recent years.

If we compare data for the first three quarters of 2022 to the same period in 2021, it becomes clear that the market continues to thrive, according to AutoTrader. Of course, demand for used cars has driven up prices. The average list price of used cars for sale has increased by 10%, from R386 682 in 2021 to R427 290, in 2022.

Off the back of strong year-on-year growth, search and advert views for the period have grown by 5.64%. Searches are an indicator of popularity, with advert views showing the level of interest in a particular car and enquiries indicating which cars the consumers are most likely to buy.

But most notably, supply has not kept pace with demand. While the seven cars that sellers get the most enquiries for has remained unchanged, stock levels of the mostly locally built cars have changed dramatically.

Supply of the country’s best-selling used passenger car, the Volkswagen Polo Vivo, has halved, while the second biggest drop in supply in used cars has been the BMW 3 series (33%) followed by the Mercedes-Benz C-Class (17%), Volkswagen Polo (16%), and imported VW Golf (11%).

In contrast, supply of used bakkies has increased. The Toyota Hilux (the car that receives the most enquiries) increased in supply by 18% and the Ford Ranger by 3%.

Some worrying local and international signs point to a bursting of the used car market bubble.

Locally, rising interest rates and inflation, and spiking fuel prices are likely to dent demand. With the cost of living continuing to rise, consumers are feeling the pinch.

What’s more, while South Africa lags overseas trends, there are worrying indicators emerging abroad, not least of which is a drop in used car price inflation and concerns around the car loan debt market in the US.

Can we expect demand for used cars to fall in 2023?

AutoTrader CEO George Mienie says that if the new supply chain issues, as well as chip shortages for new cars, are sorted, this could cause increased demand for new cars and put downward pressure on used car prices as demand falls.

“The used vehicle price inflation bubble is flexing and, under the right economic demand and supply conditions, could burst in the next 12 months. As housing costs go up, interest rates increase. Car demand may fall. I always say, if the US or EU sneezes, we get pneumonia,” Mienie says.

Original Article

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