Strength of the rand is ‘good news’ for new vehicle prices

The strengthening of the rand against other currencies is “good news” for consumers when it comes to the price of new vehicles. Toyota South Africa Motors (TSAM) president and CEO Andrew Kirby said on Thursday that Toyota tries to avoid price reductions because of the negative consequences such cuts could have on existing customers. Instead, Kirby explained, the company seeks to offset inflationary increases in input costs for new vehicles.

“We’ve been very aggressive in not pricing in the last two years and taking minimal pricing,” he said on the sidelines of TSAM’s annual State of the Motor Industry briefing. Kirby said the strength of the rand is definitely going to help with new vehicle pricing, but there is a lagged effect because of the lead time with the supply of imported components compared to when they sell vehicles in the domestic market. “We are not seeing the benefit of the strong rand yet.

It’s still coming through. “As that comes through, we are hoping that we will be able to restrict what would normally be an inflationary-linked price increase,” he said. In the past, when the rand has been depreciating in value, vehicle manufacturers have sometimes announced quarterly price increases.

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Kirby added that TSAM’s pricing is linked not only to the consumer price index but also to commodity prices, such as steel, while transport costs also have quite a big impact on their business. “But we do forecast that we will be able to limit price increases as a result of the strength of the rand, so I do think it’s good news for the end consumer,” he said. Justin Barnes, executive director of the Toyota Wessels Institute for Manufacturing Studies (TWIMS), said an inconvenient fact is that the average tax on a South African vehicle is R120 000, which means that when a consumer buys an average car, R120 000 is being handed over to the government in the form of value-added tax (Vat), ad valorem tax, carbon tax and the tyre levy.

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