Imagine this: R30,000, which once bought a car, now barely covers the cost of an iPhone. This is the stark reality Toyota South Africa CEO Andrew Kirby is highlighting. He’s raising alarms about the significant increase in car prices and how it’s affecting South African consumers. Rising car prices are not just a financial issue; they also reflect deeper problems within the local automotive industry, such as outdated tax policies and supply chain disruptions.
The price of a car in South Africa is climbing, and many people are wondering how they can still afford to buy one.
The Surge in Car Prices
A Major Price Jump
In 1995, the Volkswagen Citi Golf Chico, a popular entry-level car, was priced at R33,950. Fast forward to 2025, and the entry-level Toyota Vitz 1.0 now costs R178,800. This huge price difference highlights how much rising car prices have impacted the South African market over the years.
While inflation plays a role, it’s clear that car prices have increased far more than wages, making it harder for the average South African to afford a new vehicle. For many, the dream of owning a new car is slipping further out of reach.
What’s Driving These Price Increases?
Several factors are contributing to the rise in car prices:
- Economic Pressures: Rising costs for raw materials, labour, and shipping are all contributing to higher vehicle prices. Manufacturers are passing these costs on to consumers, which means you’re paying more for a car at the dealership.
- Ad Valorem Tax: Introduced in 1995, the ad valorem luxury tax was initially aimed at high-end vehicles. However, it now applies to lower-end models too. This has made cars, which were once considered affordable, much more expensive, further contributing to rising car prices.
- Supply Chain Disruptions: Global supply chain issues have caused shortages of essential parts, which has increased production costs for car manufacturers. These disruptions make it harder to get cars to the market on time and add to the financial strain.
The Impact on Local Manufacturing
Declining Local Production
One of the most concerning aspects of rising car prices is the impact on local vehicle production. In 2018, 46% of new cars sold in South Africa were made locally. By 2023, that number had dropped to just 43%. This decline in local production is worrying, especially given how many jobs the automotive sector provides.
More Affordable Chinese Imports
Another challenge for local manufacturers is the rise of Chinese vehicle imports. Chinese automakers can offer vehicles at a lower price point, which has made them increasingly attractive to South African consumers.
From 2018 to 2023, the combined market share of Indian and Chinese vehicles rose from 18% to 37%. Chinese cars alone accounted for 9% of the market in 2024, up from just 2% in 2019. This trend is putting pressure on local manufacturers, particularly as rising car prices make it difficult to stay competitive.
Calls for Urgent Policy Reform
Reviewing the Ad Valorem Tax
Andrew Kirby has called for a review of the ad valorem tax, which now impacts lower-end cars that were once affordable. Originally intended to target luxury vehicles, the tax now makes it more expensive for the average South African to buy a new car. Reforming this tax could help reduce the price of locally produced cars and give local manufacturers a better chance to compete against cheaper imports.
Supporting Local Manufacturing
In addition to revisiting the ad valorem tax, Kirby is pushing for stronger support for local car manufacturing. While the South African government’s Automotive Production and Development Programme (APDP) offers incentives for local manufacturers, Kirby believes these incentives aren’t enough to keep local manufacturers competitive against the influx of affordable imports. More substantial support for local production could help reduce reliance on imports and protect local jobs.
Investing in Local Component Production
One solution that could help address the rising cost of cars is investing in the local production of essential car components. The disruptions in global supply chains over the past few years have highlighted South Africa’s dependence on overseas suppliers. By investing in local component manufacturing, South Africa could reduce its reliance on imports and help stabilise vehicle prices in the long run.
The Impact on South African Consumers
Affordability Challenges
The rising car prices are making it increasingly difficult for many South Africans to afford a new car. The entry-level models, which were once accessible to a large portion of the population, are now out of reach for many. As a result, many people are turning to the used car market, where prices are also on the rise.
For those who still opt for new cars, the high cost is creating a financial burden. With fewer options at affordable prices, many South Africans are being priced out of the new car market.
Shifting Consumer Preferences
As new car prices continue to rise, South African consumers are changing their buying habits. Many are opting for smaller, more affordable vehicles or buying used cars to avoid the higher prices. This shift in preferences highlights the growing demand for budget-friendly transportation options.
Car manufacturers are starting to respond by introducing more affordable compact models, but even these are subject to the same rising prices. For now, the challenge remains: how can consumers get the cars they need without breaking the bank?
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The Road Ahead: Key Considerations for Policymakers
The rising car prices in South Africa are creating a perfect storm of challenges for both consumers and manufacturers. Policymakers must take action to address these issues. Reviewing outdated tax policies, offering stronger incentives for local production, and investing in the local manufacturing of car components could help stabilise the market.
By ensuring that cars remain affordable and competitive, South Africa can protect its automotive industry, create jobs, and help consumers maintain access to affordable vehicles. Addressing these issues is essential for the long-term health of the South African automotive sector and the economy as a whole.