Car demand shifts to cheaper models as households feel the squeeze

Even as new vehicle sales continue to grow at a double-digit pace, at least one car sector leader believes the data reveal alarming trends that show the severe pressure on the sector, and motorists.

Bobby Ramagwede, CEO of the Automobile Association of South Africa, told Business Times this week that the car sector cannot be expected to save the beleaguered South African steel industry, as the sector itself is in dire straits.

“The challenge that we’re faced with right now is the lack of real central planning. It’s been a point that we’ve raised for a while, [albeit] not vocally enough. We, unfortunately, if you take ArcelorMittal out of the equation, are not in a position to bring in rolls of steel any cheaper than anywhere else in the world.”

Ramagwede told a Nedbank-Automechanika media roundtable in Cape Town, that the local market does not have any fabricators of steel other than Allied Steelrode, the biggest for the automotive and construction industries.

“Allowing that industry to fall flat on its face is going to have downstream implications. So, auto sector aside, you’re going to see these ripple effects creep into other industries that rely on steel, specifically construction.

“So, the question we often ask ourselves is, in a world where we cannot source our own steel, or cannot produce our own steel, and cannot source it cheaply, what direction are we taking as a country?”

The Automotive Business Council (Naamsa) reported this week that the local car sector achieved 61,645 in domestic sales in September, representing a 12.7% increase compared with 54,706 units sold in September 2025.

Ramagwede said that while new vehicle sales seem healthy, there is a strong leaning towards entry-level vehicles, indicating consumer income strain.

“I’m often quoted as a guy who walks into a room and says that the emperor is naked. And indeed, the emperor is naked. Of concern to both myself and the Automobile Association is the direction in which the auto industry is headed and whether or not South Africa has got a good handle on what’s coming.

“It looks good, it looks rosy, you’ve got some great Naamsa figures, but when you scratch beneath the surface, there’s a story that’s emerging. And that story is quite concerning. Most of the vehicles that are being sold, whose stats are being published, are entry-level vehicles.”

Naamsa’s figures showed that South Africa recorded 305,899 new passenger vehicle sales in the year to August, up 13.5% from the 269,400 recorded in the same period last year.

According to its report, 422,459 passenger vehicles were sold in 2025. This was higher than the 351,553 sold in 2024 and the 347,367 in 2023, but both these last two figures were lower than the 363,682 sold in 2022.

South Africa is allowing things to fall flat, Ramagwede said, but holding the same policy regime in place while “paying a double whammy” because it costs a lot of money to import steel, but it also costs a lot of money to import steel fabricators.

On the consumer side, TransUnion’s Industry Insights report for the second quarter of 2026 said South Africa’s consumer credit market remained resilient, but growth was becoming increasingly selective, segmented and dependent on how consumers manage affordability.

“Vehicle buyers are placing greater emphasis on financing costs, fuel efficiency and total cost of ownership, while lenders across multiple products are increasingly focused on managing exposure, credit limits and portfolio quality. The result is a market where growth remains achievable but is becoming increasingly dependent on product design, affordability management and risk discipline.

“Demand for credit remains evident across major products, yet both consumers and lenders are adapting to a more complex operating environment. Rather than withdrawing from the market, consumers continue to seek credit, mobility and household spending solutions, although they’re becoming more deliberate in how they access and use them.”

The report said lenders are increasingly balancing growth opportunities against affordability and portfolio risk, and that rising sales and appetite for new finance solutions show the market is more value-conscious than demand-constrained.

“The Mobility Insights Report showed passenger vehicle sales increased 15.8% year on year during [the second quarter], while Chinese manufacturers continued to gain market share through competitively priced vehicles and strong value propositions.

“At the same time, consumers showed growing interest in technologies that could reduce long-term ownership costs, with hybrid vehicles emerging as an increasingly attractive alternative for consumers focused on fuel efficiency and operating costs.”

Charles Dednam, general secretary of the South African Iron and Steel Institute, recently told parliament that the local steel industry remained in distress and that steel production has dropped 18% since 2018.

Acting deputy director-general of sectors at the department of trade, industry and competition, Tebogo Makube, said the Newcastle Amsa steel plant remains under care and maintenance. The department has temporarily allowed importation to support inputs into the car sector.

Business Times