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SIMON BROWN: Today, I’m in conversation with Ghana Msibi, the CEO of WesBank. Thank you for joining us, Ghana. The vehicle industry faced numerous challenges in 2024. While this year may also pose difficulties, it may not be as harsh. Are there any indications of recovery in the sector?
GHANA MSIBI: Hi, Simon. Yes, it has been a tough cycle. I would describe 2024 as a continuation of a downturn that has plagued the automotive industry for the past decade. We’ve been facing obstacles for the last ten years.
Many might pinpoint 2020 as the lowest point, but the decline has been gradual over the years.
As you noted, we anticipate a better outlook in 2025, but I must advise that it won’t be a dramatic recovery.
I would suggest it will be modest – projecting growth between 3-5%. It’s not overly thrilling, yet certainly an improvement.
SIMON BROWN: We’ve noticed that established brands are currently battling fierce competition. The influx of Chinese automakers is intensifying competition from a consumer perspective, especially in terms of pricing and value.
GHANA MSIBI: Definitely. To put it into perspective, in 2024, total new car registrations in the market fell by 3%, totaling around 515,000. Local manufacturers, referred to as traditional players, faced declines of over 15%, whereas Chinese brands noted a growth of nearly 25%.
This transition highlights the evolving market dynamics, not even considering the brands that launched later in the year… Competition is indeed heating up locally.
Read: SA new vehicle sales surge 10.4% in January
SIMON BROWN: That’s encouraging news for consumers. It often boils down to pricing and value for money. The local industry must be increasingly vigilant regarding this shift. I can’t imagine they’re remaining passive while experiencing a decline of minus-15%. Are they prepared for the competitive environment we expect in the coming years?
GHANA MSIBI: That’s an insightful question. There are several factors to consider; many traditional brands have revised their product lines. When we analyze the price variations, the challenge of competing with some of these Asian brands becomes apparent. As you mentioned, the value proposition is critical, intensifying competition.
On the other hand, there’s a growing trend toward plug-in hybrids, where we don’t see Chinese brands exerting considerable influence yet, in contrast to traditional brands. This makes consumer choices particularly intriguing.
Pricing will undoubtedly play a crucial role, and there’s also an increasing awareness regarding climate issues. One certainty is that the hierarchy of market players is set to transform, with Chinese automakers emerging as significant competitors in the top 10, which we can confidently predict.
Listen/read: China rattles global auto sector …
SIMON BROWN: You mentioned plug-in hybrids. I recently observed a fully electric vehicle charging at a station for the first time. We’re seeing gradual growth in that area. While many point fingers at Eskom, the situation seems to be improving. Furthermore, plug-in and hybrid models are making strides. Should we anticipate growth in the broader battery market locally?
GHANA MSIBI: I must say, to be fair to Eskom, I don’t believe they are solely responsible in this scenario. Various elements influence EV adoption, such as range anxiety, understanding used car valuations, and the advancement of technology and pricing. The starting point is quite low, so although we will see gradual progress, I don’t expect a massive impact on the overall market just yet.
However, looking beyond the borders of South Africa, we’re witnessing a substantial annual increase in EV sales.
This growth is primarily driven by consumers struggling to transition from older vehicles. Improvements in battery technology are leading to more favorable options now. Normalization is indeed on the horizon.
Yet, I believe South Africa is still some distance away from seeing a significant contribution of EVs in terms of overall vehicle sales. On the flip side, we can anticipate a surge in plug-in hybrids, as more consumers are leaning towards that option over fully electric vehicles.
Read: First signs of SA auto industry deindustrialising, warns Toyota CEO
SIMON BROWN: Absolutely. And you’ve highlighted a key point – electric vehicles are still a relatively new technology, while internal combustion engines have been in existence for over a century.
Before we conclude, one final question: we’ve focused on new vehicles. How is the pre-owned vehicle market performing? If buying a new car is challenging, a second-hand option might fit the budget better.
GHANA MSIBI: It’s fascinating. The used car market is thriving compared to the new car sector, primarily due to price inflation in that segment. A greater number of consumers find used vehicles more affordable than new ones.
This landscape will change. Currently, we have approximately 2.6 used vehicles for every new vehicle in our records, up from a low of 2.1. This trend is likely to continue, but manufacturers are becoming more proactive with promotions to reclaim market share.
We are genuinely entering what I term the ‘Asian invasion’, which will inundate the market with new vehicles.
Anticipate a rebalancing soon. However, I doubt we’ll see a return to a sub-2:1 ratio for new to used vehicles. Consumers will continuously find better deals in the used market, so I expect a sustained preference for that option.
SIMON BROWN: “Money on the bonnet” is a wonderful term! We’ll end here. Thank you, Ghana Msibi, CEO of WesBank, for your time today.
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