Over time the hefty fuel price increases South Africa faces would definitely dent the number of vehicles being sold, National Association of Automotive Component and Allied Manufacturers (Naacam) executive director Renai Moothilal said yesterday.
South Africans today face another massive petrol price increase that will push the price of all petrol grades above the R24.00 mark. This as petrol prices went up by R1.71 per litre, and diesel increased by between R2.76 and R2.84 a litre from Wednesday.
Moothilal said they already saw shifts in consumer preferences on vehicle ownership in general and high fuel prices were adding to this.
“Consumers may find more value in concepts like ride sharing and car pooling, in addition to existing public transport options,” he said in an email interview.
If consumers found the cost of fuel prohibitive and they moved away from vehicle ownership, it could impact the business case for domestic vehicle manufacturing, especially for those original equipment manufacturers who supplied the domestic market.
This would result in economic losses down the value chain, including at component manufacturing level. And South Africa needed more vehicle assembly volumes to drive component manufacturing, a sector with more than 80 000 direct jobs.
Lebogang Gaoaketse, WesBank head of marketing and communication, said, “The rising cost of fuel directly affects the total cost of ownership of a vehicle, which includes fuel costs. This can potentially lead to a decrease in the number of cars sold, particularly among those who are price sensitive.
“There is also a growing trend towards downsizing, where consumers are opting for smaller vehicles, which are more affordable and fuel efficient, and offer better value for money with regard to standard features,” Gaoaketse said.
Wesbank said continuous fuel price hikes had a multifaceted impact on the local economy.
“Rising fuel costs may also affect consumer confidence, leading to decreased demand for vehicles. As a result, the vehicle production and sales industry could potentially face reduced growth. This could, in turn, have broader economic implications, especially on inflation,” Gaoaketse said.
Gaoaketse said following the recent BRICS summit, where it was announced that several OPEC countries were invited to join the BRICS block, there was widespread optimism that this would have a positive impact on the price of fuel in the member countries, including South Africa.
The Automobile Association (AA) warned that the fuel price increases would have negative consequences for all consumers, not just motorists, as the higher transportation costs would inevitably filter their way through to general inflation.
“Motorists will certainly feel the pinch in terms of higher prices at the pumps, but consumers across the board can expect higher prices to all goods and services because of these hikes,” the association said.
The AA has also called for urgent intervention in the RAF levy, which currently comprises R2.18 on every litre of petrol and diesel sold in the country.
Benay Sager, chairman of the National Debt Counsellors’ Association (NDCA) said the spend on fuel was indeed a significant expense for consumers. “Since 2016, the cost of fuel has doubled. In addition, during that period, cumulative inflation growth was 39%. Furthermore, the benchmark interest rate (repurchase rate) is 475 basis points higher than what it was in 2020.
“As a result, both the ownership and running costs of cars have gone up significantly, and upcoming fuel price hikes will make the situation even worse for consumers,” Sager said.
NDCA said the cost of transport was also likely to increase for the broader population, which did not own cars, so overall transport costs would go up.
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