Volkswagen South Africa chief executive Hans-Christian Maergner has added his support to calls for government to allow private leasing of vehicles and to extend repayment periods.

Volkswagen South Africa chief executive Hans-Christian Maergner has added his support to calls for government to allow private leasing of vehicles and to extend repayment periods.

These are two of the proposals mooted for a planned summit of motor manufacturers, dealers, the financial and insurance sector, and government to address the problem of new-car affordability.

CARtoday.com reported last month that Wesbank chief executive Ronnie Watson, McCarthy Motor Holdings chief executive Brand Pretorius and economist Tony Twine had suggested a combined effort by motor industry stakeholders was necessary to improve levels of vehicle affordability and stimulate the stagnant new vehicle market. Watson also advocated a plan similar to the minibus taxi-scrapping subsidy to reduce the number of ageing cars on the road.

Maergner said at the weekend that he supported calls by the financial sector and automotive dealers for government to change its vehicle finance legislation, but cautioned that while this could help in the short term "it may not increase overall demand".

Instead, Maergner agreed with Watson that a scrapping allowance for private vehicles, along the lines of the one being planned as part of government’s taxi recapitalisation process, would be feasible.

"I have raised this issue with Trade and Industry Minister Alec Erwin and with Finance Minister Trevor Manuel," Maergner said.

"This will help to get rid of two problems. The first is safety, with an ageing car population, where there are vehicles of 13 years and older on our roads. Secondly, it would definitely give a short-term boost to the economy. You shouldn't underestimate the impact on confidence of a windfall effect on the economy."

He was keen to attend the planned summit between manufacturers, dealers, bankers, the insurance sector and government.

"We must come up with a win-win solution for all ," said Maergner, who added that there were precedents in Europe for offering a scrapping allowance for cars, with payments of about R10 000 a vehicle.

In South Africa, such an allowance "would need to be structured for the local market and for local needs".

While aware of the industry debate on the possibility of introducing a low-priced "people's car" to South Africa, Maergner said he was worried that such a vehicle might have minimal safety features

Turning to foreign direct investment, he said that without it the South African economy could not grow faster than 2,5 to three per cent a year.

"That rate of growth will not eliminate the big problem of unemployment. To reduce unemployment by 20 per cent or more, you need a plan to grow the economy by five to six per cent at least. If it remains at three per cent, unemployment will grow.

"As an industry we are forced to constantly increase our productivity," said Maergner.

Original article from Car