Car prices will remain high

Johannesburg - While sales in SA's struggling motor vehicle industry continue to decline, new vehicle prices are set to remain the same.

New vehicle sales declined by 24% to 30 065 units in June compared to the same month last year, according to figures released by the National Association of Automobile Manufacturers of South Africa (Naamsa) on Thursday.

"As a retailer we're pleading for more affordable cars," said Brand Pretorius, CEO of McCarthy Motor Holdings. "We've made massive investments and affordable products unlock growth in any industry."

Pretorius said car prices remained high because parts and components were ordered and bought in 2008 at unfavourable exchange rates.

Passenger car sales dropped by 17% to 19 035 units compared to June last year.

"In an economy that's suffering from depressed demand, prices do not necessarily fall, especially not in nominal terms," said Tony Twine, an economist at Econometrix. "If the supply side is facing importers' inflation because of exposure to weaker exchange rates, prices will rise as the volume of cars decline.

"Also, vehicle companies and parts suppliers are owned by foreign firms, so we must sell at prices that are palatable in places like Tokyo and Stuttgart," said Twine.

June sales were 16% up on the figure for May. Pretorius said special offers and subsidised interest rates were the most likely cause of the sudden increase.

Naamsa anticipates domestic vehicle sales to recover towards the end of 2009 or early in 2010.

"Offshore currency exposure means that the valleys and peaks of the exchange rate are quick to come home to roost in vehicle prices," said Twine.

- Fin24.com