steeper car price hikes coming, warns expert 
13 August 2008
 
Between now and the middle of next year, car price increases may lag increases in the CPIX rate, but after that “we could go through a period of a year or longer when car price increases exceed CPIX”, says Twine.

This warning comes as car makers start raising car prices in a bid to share part of the accelerating production costs with consumers.  Nico Vermeulen, executive director of National Association of Automobile Manufacturers of SA (Naamsa) says that car prices have risen by an average 6% this year.  Twine says the car manufacturers have maintained prices “surprisingly low” mainly because sales remain sluggish amid high interest rates, increasing consumer debt burden, low appetite for new debt, and anaemic economic growth.

Brand Pretorius, McCarthy Motor Holdings chairman, says that the 6% increase confirms that car prices have declined in real terms.  “Over the last three and half years, there has been car price deflation,” he says. Too much inventory and fierce competition has also kept a lid on car prices.  He says rising production costs have squeezed profit margins, leaving car makers unable to absorb cost increases.

Renault SA spokesman Alyson Strever says the exchange rate has had the single largest effect on its local pricing.  Richard Sloman, spokesman for Chrysler SA, says: “Our price increases are generally based on currency fluctuations and/or product content pricing.”  Even Toyota SA concedes it is battling with high input costs.  Ferdi de Vos, spokesman for Toyota SA, says inflation pressures, escalating commodity prices and the exchange rate have compelled the company to review its prices. The bulk of costs come from commodities such as steel, platinum, copper as well as labour.

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Artwell Dlamini, www.businessday.co.za