Car makers to hike rather than slash prices

Toyota SA spokesman Ferdi de Vos said on Friday, 26 June 2009, any car manufacturer had to assess what was happening to the rand, which was still not in favour of local vehicle producers.

This suggested the likelihood of more car price increases, which made it difficult for distressed consumers to afford new cars when domestic new car sales were still languishing.

Last year, the weighted average new vehicle price hike was 8.5%, the National Association of Automobile Manufacturers of SA said.

The weak rand made it particularly costly for car makers to import cars and components last year.

Vehicle importers, especially, were exposed to its full effects.

McCarthy chairman Brand Pretorius said he did not expect car prices to decline soon because much depended on what the rand did. The yen rose more than 40% against the rand last year, he said.

De Vos said the strong yen posed a challenge to Toyota SA, which increased its car prices 10% on average earlier this year.

Grant Bowring, brand and marketing manager at Subaru Southern Africa, which buys imported fully built cars in yen, said car importers in yen were all in the same boat.

Subaru, which had 19 dealers and service centres, and imported about 1500 cars a year, had increased its prices 3%-5% on average this year.

Bowring said Subaru did not have the benefit European car importers had. The euro had fared much better against the rand than the yen had.

Rand Merchant Bank currency strategist John Cairns said the yen had appreciated strongly against the rand.

The rand was 15% weaker against the yen relative to where it was before the Lehman Brothers bankruptcy last year, he said.

By contrast, the rand was at the same level against the euro over the same time, he said.

Pretorius said car price increases were slowing down because of the relative improvement in the value of the rand against the yen and euro.

The rand, he said, had recovered about 20% of its value against the yen this year.

He said new stock was coming in at a favourable exchange rate, but cost pressure was still there as car pricing depended on the exchange rate level at which cars were imported.

Pretorius said companies were still selling stock bought at a time when the exchange rate was unfavourable. “The sooner companies get out of old stock, the better,” he said.

Source: Business Day

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