The rise of e-hailing platforms in South Africa has accelerated demand for entry-level vehicles, but views are mixed on whether this might push up prices.
Marcia Mayaba, sales vice-president for auto information services at TransUnion, said the credit bureau’s vehicle pricing index for the fourth quarter of 2024 indicated there had been a “cautious recovery” in the automotive sector.
In the quarter the used-car to new-car financing ratio rose year on year from 1.23 to 1.56, indicating growing demand for used vehicles.
Mayaba told Business Times that the growth of e-hailing platforms such as Uber and Bolt had boosted demand for entry-level vehicles.
“These platforms have made it easier for individuals to enter the ride-hailing market, often opting for more affordable, entry-level vehicles due to their lower operational costs,” she said.
“While these e-hailing platforms provide a cost-effective transport solution for consumers, they also drive up demand, and possibly prices, for entry-level vehicles, affecting affordability.”
We don’t believe that ride-hailing platforms have introduced higher inflation to entry-level vehicles. On the contrary, it has contributed to more vehicles being supplied
— Henry Botha, Absa
She said market dynamics were shifting, with a stronger preference for used vehicles and alternative financing models such as leasing, car subscriptions and rent-to-own becoming more popular among cost-conscious buyers.
The TransUnion report said e-hailing, leasing and flexible financing models such as subscriptions and rent-to-buy provided people with ways to get around without having to buy a vehicle, but so far there had been little impact on traditional car buying patterns.
The index said estimates for the annual cost of using e-hailing services to make a daily commute of 20km were higher than the total cost of financing, fuelling and maintaining an entry-level car. This implied that while e-hailing remained a viable mobility solution, it was unlikely to replace traditional vehicle ownership.
Absa head of asset and vehicle finance Henry Botha said in the fourth quarter the bank received 1.71 used-car finance applications for every new car application, compared with 1.66 the same period a year prior.
“This shows what customers are interested in buying vs what they are approved for and take up in the end. The [prices] for new and used vehicles have stabilised from the high increases that were apparent in the period 2021 and 2022 when the industry experienced supply chain challenges internationally and locally.”
But he said e-hailing platforms had not necessarily pushed up the prices of entry-level vehicles.
“We don’t believe that ride-hailing platforms have introduced higher inflation to entry-level vehicles. On the contrary, it has contributed to more vehicles being supplied ... to cater to consumer demand. Increased competition in this segment is conducive to better value being offered to consumers.”
Nedbank MFC executive Dumisani Zwane said about two-thirdds of the bank’s vehicle financing arm were used-car buyers, in line with the rest of the asset and vehicle finance market.
“The South African landscape has grown comfortable with services such as Uber ... resulting in increased demand for entry-level vehicles. These vehicles also require frequent replacement as they quickly reach high mileage. As long as supply can meet demand then entry-level vehicles can remain affordable.”
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