Despite a decline in new vehicle sales, South Africa’s automobile market is seeing increasing consumer demand for used vehicles and growing interest in electric vehicles (EVs), in a move being driven by flexible financing models.
This is according to Vehicle Pricing Index (VPI) for Q2 2024, which integrates alternative data and several market-related sources to provide an overview of SA’s vehicle sales.
According to the report, SA’s automotive market continues to navigate economic challenges, with a 6% decline in new vehicle sales and a 6.1% drop in total vehicles financed, compared to Q1 2024.
Despite this, the report shows a slight increase in consumer confidence and positive trends in generational shifts toward vehicle financing.
New opportunities are emerging. Subscription-based ownership models and pay-as-you drive options are gaining traction, particularly among the younger generation, it finds.
Millennials (born 1981 to 1996) continued to dominate the market, accounting for 40% of new vehicle purchases. The growing influence of younger generations signals a shift toward more flexible, digital-first financing options and sales of EVs gradually gaining traction as sustainability becomes a central concern for younger buyers.
There was a 5% increase in EV and hybrid sales in Q2 2024 compared to Q2 2023.
“Although the economic environment remains tough, the automotive sector is showing innovation in addressing consumer affordability concerns,” notes Marcia Mayaba, sales VP: Auto Information Services at TransUnion South Africa.
“The vehicle financing landscape is evolving, with growing interest from younger generations who are reshaping the market through their preference for flexible financing models and electric vehicles.”
According to the report, Gen Z’s (born 1997 to 2012) growing presence in the market is also reshaping how the industry operates, as these younger consumers prioritise flexibility.
Subscription-based models and pay-as-you-drive services, which allow for more short-term financial commitments, particularly appeal to this demographic.
Gen Z’s share of new vehicle asset finance agreements grew from 7.9% in Q2 2023, to 10.9% in Q2 2024, according to the report.
Meanwhile, Baby Boomers’ (born 1946 to 1964) share dropped from 8.3% to 7%, reflecting a generational shift in vehicle financing.
Despite steady growth in sales, SA’s EV market remains small, accounting for less than 1% of total vehicle sales, notes the report.
AutoTrader’s 2023 Annual Car Industry report also highlights a growing trend in vehicle subscription models, which allow flexible long-term access to vehicles, through one all-inclusive monthly fee.
“Car subscriptions are made for people on the move. Customers can easily return the car, renew the contract, or even buy out the car they’ve been driving,” notes AutoTrader.
Looking ahead, the TransUnion report underlines the growing potential of EVs in SA.
While EV sales still represent a small percentage of total vehicle sales, there is optimism about future growth, especially as global trends indicate a shift toward more sustainable transportation options.
“The adoption of EVs is inevitable, particularly as younger, environmentally-conscious consumers drive demand. While the initial uptake has been slow due to higher costs and limited infrastructure, improvements in battery technology, the expansion of charging networks and potential government incentives are set to accelerate this shift,” comments Mayaba.
Comparisons to markets like Europe and China, where EV adoption is rapidly increasing, highlight the room for growth in South Africa. For this to happen, more affordable EV models must be made available, the report recommends.
Furthermore, financing options tailored for the younger generation will be essential to help push EV sales forward.
“Increased focus on sustainable transportation, coupled with expanding infrastructure and growing consumer awareness, positions EVs as a key component of South Africa’s automotive future,” states Mayaba.
By focusing on innovative financing options, supporting EV infrastructure and meeting Gen Z’s sustainability preferences, the automotive sector can position itself for long-term growth, notes the report.
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