File Picture: Due to the decline in luxury vehicle sales some brands are closing down dealerships.
Image: AFP
Constrained disposable incomes and shifting consumer priorities has seen the luxury vehicle sales market remain on the decline over recent years.
While new vehicle sales rose by 7.3% in February reflecting resilience in the automotive industry, statistics from the luxury vehicle market show that it has experienced a significant decline over the past decade, with a notable 10% drop in sales between 2022 and 2023, followed by an 8% contraction from 2023 to 2024.
Dr Paulina Mamogobo, chief economist at naamsa – the Automotive Business Council, attributed this downward trend to various economic factors.
“The contraction in luxury vehicle sales can be attributed to multiple macroeconomic factors, including rising inflation, higher interest rates, currency depreciation, and subdued economic growth, all of which have constrained disposable incomes, even among high-net-worth individuals,” she said.
Beyond economic challenges, changing consumer priorities have also played a role. “Shifting consumer priorities, toward value-driven purchases and sustainability considerations, have further dampened demand for high-end vehicles,” Mamogobo said.
She added that premium brands across the spectrum have been affected.
A key trend shaping the market was the growing demand for affordable vehicles. She said that recent data showed that 56% of cars sold in 2024 were priced below R500 000, a slight decrease from 63.3% in 2023. Additionally, 41% of these sales were SUVs, indicating a consumer preference for high-specification yet cost-efficient vehicles.
She also said the growing presence of Chinese automotive brands in South Africa signalled a shift in purchasing behaviour. “The increasing traction of Chinese automotive brands within the South African market… does not necessarily indicate a decline in consumer appetite for new vehicles but rather a recalibration towards affordability-driven purchases,” she said.
Economist Professor Waldo Krugel highlighted the broader economic landscape affecting luxury vehicle sales.
“There has definitely been a shift, and we see it in the success of Suzuki, offering small, affordable cars,” he said.
February vehicle sales confirms this trend with the National Automobile Dealers’ Association (Nada) noting that brands including Suzuki, Hyundai, Kia, Mahindra and Chery were gaining traction in the entry and lower segments of the market. “This shift suggests that affordability is playing a key role in driving unit sales, enabling consumers who previously could not afford a new vehicle to enter the market,” Nada said.
Krugel said that another factor impacting the luxury vehicles market was that these vehicles are often fully imported, making them vulnerable to fluctuations in the exchange rate.
He added that since 2021, South African consumers have faced rising inflation and high interest rates while incomes have remained stagnant, further reducing disposable income.
“All of it means that cheaper competitors from China and India have been making inroads into our market,” Krugel said.
He emphasised that the combination of low economic growth, high borrowing costs, and stagnant real incomes has had a major impact on new vehicle sales, particularly in the luxury segment.
Due to the decline in luxury vehicle sales some brands are closing down dealerships. Last week, Independent Media Motoring reported that Volvo Cars South Africa had announced a restructuring process that will see it closing dealerships outside of the major urban areas.
Martlé Keyter, CEO for Operations at the Motor Industry Staff Association (Misa), said the union has not been formally notified of any restructuring at Volvo Cars South Africa but had received informal reports from some dealerships.
Beyond Volvo, Misa said it has observed a broader trend of restructuring within the luxury vehicle sector. Keyter revealed that Misa is involved in multiple restructuring consultations under Section 189 of the Labour Relations Act at dealership groups nationwide.
