TransUnion Vehicle Pricing Index Q3 2020

[Pages:5]TransUnion Vehicle Pricing Index Q3 2020

Executive Summary

The TransUnion SA Vehicle Pricing Index (VPI) measures year-on-year price increases for new and used vehicles from a basket of passenger vehicles of the 15 top manufacturers by volume. The index is created from vehicle sales data collated from across the industry.

Used car prices are expected to increase as demand grows and the supply of quality used vehicles diminishes, amid positive signs of a rise in new and used financed vehicles between July and September 2020 (at 45% and 35% respectively).

The VPI for new and used vehicles has increased, with new vehicle prices expected to rise based on previous patterns seen between Q1 2011 and Q2 2013. Compared to Q3 2019, new vehicle VPI rose to 7.6% from 3.3% and used vehicle pricing rose to 2.3% from 1.1%.

Macro-economic conditions have been difficult as South Africa's GDP dropped by 51% in Q2 2020. While consumer spending dropped drastically with less affordability for big purchases, consumer and business confidence increased after record lows over the previous quarter -- a positive signal for the industry.

Total financial agreement volumes in the passenger market have decreased substantially by 21% YoY from Q3 2019. New and used passenger finance deals have also decreased YoY by 23% and 20% respectively. This decline can be attributed to difficult trading conditions and uncertainty in the market.

The used-to-new ratio has increased slightly to 2.35 in Q3 2020 vs. 2.31 in Q3 2019. In the used vehicle market, 36% of used cars sold are under two years old -- an ongoing trend for Q3 2020. Demo models made up 6% of used financed deals, suggesting consumers are opting for older vehicles as pressure on disposable income increases. According to the National Association of Automobile Manufacturers of South Africa (NAAMSA), there's been a YoY decline of 33% in new passenger vehicles sales in Q3 2020 (vs. Q3 2019).

There's more movement in new and used car financing in the following price brackets: below R200K, between R200K and R300k, and over R300K. Over the past quarter, financing of vehicles over R300K is the highest it's been since we started tracking in 2011. Despite lower overall volumes, we expect this positive trend to continue into the next quarter. This is also indicative that consumers' disposable income is under strain which causes them to forgo or delay purchases.

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Consumer affordability is expected to rise as the repo rate dropped to an all-time low of 3.5%, leaving lenders exposed to high delinquency rates. To minimise this risk, they'll need to manage key drivers and amend thresholds of loan to value ratios, loan terms and balloon payments. Both consumers and dealers should carefully consider the vehicles they purchase or stock -- as a result of defleeting and repossession of certain vehicle derivatives in the upcoming months.

Overall, the global automotive industry has had another challenging quarter as global lockdowns are lifted and we adapt to a `new normal.' In South Africa, it's been a quarter of gradual recovery in business and consumer confidence, new vehicle sales, finance applications and overall demand. As the industry continues to adjust to change, future opportunities will be found in effective maintenance of and communication with existing clients.

1. Q3 2020 VPI Results

New Pricing Index (Figure 1.1 and 1.2)

New vehicle price increases are above inflation, and we expect this to increase further in the coming months.

Used Price Index (Figure 1.1 and 1.2) Used vehicle price increases have also moved up to 2.3%, although we expect this to rise marginally as new vehicle prices increase.

Q3 Q3 Q2 2020 2019 2020

New VPI

7.6%

3.3%

6.5%

Used VPI

2.3%

1.1%

1.6%

CPI 3.1% 4.3% 3.0%

Figure 1.1

VPI and CPI

15%

10%

5%

0%

-5% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Index - New (Rate)

Index - Used (Rate)

CPI - Base = Jan 2000 (Rate)

Figure 1.2

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2. Q3 2020 Used-to-New Ratio

Used-to-New Ratio (Figure 1.3 and 1.4)

The used-to-new ratio is based on finance deals registered in the past quarter. The ratio indicates finance houses are financing 2.35 used vehicles for every 1 new vehicle -- which should remain consistent in the coming quarter.

2.35

Q3 2020

2.26

Q3 2019

2.31

Q2 2020

Figure 1.3

Used-to-New Ratio

3,00 2,50

2,00

1,50

1,00 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Total

Figure 1.4

3. Q3 2020 Vehicle Asset Finance Results

Vehicle Asset Finance (Figure 1.5 and 1.6) This shows consumers' ability to buy more expensive vehicles has risen -- with the over R300k band at its highest since we started tracking in 2011. Despite lower volumes, we expect this positive trend to continue.

33%

39%

Q3

2020

28% Figure 1.5

R300,000

Vehicle Asset Finance Bands

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Figure 1.6

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4. Q3 2020 Top Manufacturers by Sales Volume ? Passenger

Manufacturers by Financed Sales Volumes (Figure 1.7 and 1.8)

Toyota and VW performed well in both areas, sharing the top two spots in used car sales volumes, while Hyundai and VW enjoyed growth in new vehicle sales.

Used Passenger Vehicle Sales

New Passenger Vehicle Sales

37%

24%

16% 7%

7% 9%

19% 4% 4%

18%

20%

35%

VOLKSWAGEN TOYOTA HYUNDAI MERCEDES-BENZ FORD OTHER

Figure 1.7

VOLKSWAGEN HYUNDAI TOYOTA AUDI KIA OTHER

Figure 1.8

5. Q3 2020 Top Manufacturers by Sales Volume - Light Commercial

Manufacturers by Financed Sales Volumes (Figure 1.9 and 1.10)

Toyota had an exceptional quarter on the new light commercial vehicle finance market, capturing a staggering 57% of sales volume. Ford joins Toyota in dominating the used light commercial vehicle market, making up 60% of all finance sales.

Used Light Commercial Vehicle Sales

New Light Commercial Vehicle Sales

10% 7% 7%

30%

16% 30%

2% 5% 6%

14%

57% 16%

FORD TOYOTA NISSAN ISUZU VOLKSWAGEN OTHER

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TOYOTA NISSAN FORD ISUZU VOLKSWAGEN OTHER

Figure 1.10

Contact us

TransUnion SA Vehicle Pricing Index queries can be directed to: Michelle van Renen | SA_MkrtComms@ or +27 11 214 6000

Want to know more?

We can help you gain a more granular view of your operating environment with our Business Intelligence Reports. With access to extensive data and predictive insights you can identify, segment and effectively target prospective customers amid tough economic pressures. For more information on our BI Reports contact: Kriben Reddy | Kriben.Reddy@ or on +27 11 214 6000

Sources: Figure 1.1 and 1.2 ? Industry Sales Data, Figure 1.3 to 1.10 ? New Financed Vehicle Sales Data, Figure 1.11 ? NAAMSA TransUnion Auto Information Solutions (TransUnion) obtains information for its analyses from sources, which it considers reliable, but TransUnion does not guarantee the accuracy or completeness of its analyses or any information contained therein. TransUnion makes no warranties, expressed or implied, as to the results obtained by any person or entity from use of its information and analyses, and makes no warranties or merchantability or fitness for a particular purpose. In no event shall TransUnion be liable for indirect or incidental, special or consequential damages, regardless of whether such damages were foreseen or unforeseen. TransUnion shall be indemnified and held harmless from any actions, claims, proceedings, or liabilities with respect to its information and analysis. 5 | ? 2020 TransUnion LLC All Rights Reserved | 20-901874

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