Wesbank chief executive Ronnie Watson and economist Tony Twine have made suggestions they say will improve the level of vehicle affordability in SA and stimulate the new vehicle market.

Wesbank chief executive Ronnie Watson and economist Tony Twine have made suggestions they say will improve the level of vehicle affordability in SA and stimulate the new vehicle market.

Naamsa released the new vehicle sales statistics for March on Tuesday, and the figures suggested that there was a marginal increase in sales in the first quarter of this year.

Watson this week echoed the sentiments of McCarthy chairman Brand Pretorius, who warned that average finance payments on new vehicles shot up by 28 per cent last year, and suggested that the affordability crisis would lead to new vehicle sales falling in SA.

The Wesbank chief called for a summit meeting between automotive manufacturers, the finance sector and government to discuss the crisis of affordability in the retail motor car sector.

"Affordability, overall, still remains a very big challenge," said Watson. "In spite of people having to make bigger deposits when they purchase a vehicle, average instalment payments have gone up 40 per cent from an average of R2 385 in January 2001 to R3 333 in March 2002."

Stimulating growth, ridding roads of “virtual wrecks”

Watson said that automotive manufacturers, the finance sector and government needed to find ways to stimulate growth in the local market, given that demand for new vehicles is relatively stagnant over time.

He also highlighted the "arrive alive" issue, which concerns the number of virtual wrecks on SA roads.

"Our car park (the fleet of vehicles on SA roads) is getting older, with many of the older vehicles being totally unroadworthy," said Watson. "We don't have a vehicle certification system such as the UK's MOT system, but it would make sense to implement a roadworthy certificate for vehicles from six to eight years old."

Watson told that this might be accompanied by some sort of subsidy system for the replacement of aging vehicles, and he noted that a subsidised replacement scheme was already being planned for commuter taxis.

"Why should there not be a similar scheme for private motorists?" he asked. He added that a number of incentives could be offered to motorists to replace their existing vehicles, ranging from rebates to some form of scrapping allowance, to tax incentives.

Growth in car market and economy not in sync - Tony Twine

Econometrix economist Tony Twine told that while SA's gross domestic product had grown by an average rate of three per cent annually since 1960, the trend line for passenger vehicle sales had progressed by just two per cent a year.

Twine said that while several factors had inhibited faster growth in car sales, high prices appeared to be the most obvious. "The real price of cars doubled between 1985 and 1987 and doubled again between 1988 and 1993," he said.

He suggested that "large-scale emigration of people who used to be able to afford vehicles" could be another longer-term factor in depressing demand for new cars.

Leasing options, the possible importation of budget cars

Twine said there were no quick-fix solutions to the problem of car affordability, but ideas such as leasing options for the ordinary motorist and innovative financing could be explored.

"It is a challenge to the domestic motor industry to help fill the affordability gap – maybe it's in finance," Twine said.

Otherwise, "some well-meaning politician might relax the controls on vehicle imports,” Twine said, adding: "He might decide there are R20 000 to R25 000 vehicles available from, say, the Chinese market, and legislation could change to allow these vehicles in."

Duane Newman, the car industry group leader at Delloitte & Touche, said if the cost of vehicles locally was divided by the average annual per capita income, the time it took to pay off a car was much higher than overseas, putting a vehicle out of reach for most people.

”Unless something is done (to improve the affordability of locally-produced vehicles) something might be imposed on the industry from the outside. When you have a market that builds up an affordability gap that becomes a bit of a vacuum through market forces, it draws other suppliers into the market,” Twine said.

”Those suppliers might come from unexpected quarters, such as China or Australia’s used car market – or involve Morris Minors built in Mauritius,” he added.

Original article from Car