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The strengthening of the rand against other currencies is \u201cgood news\u201d for consumers when it comes to the price of new vehicles.<\/p>\n
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.<\/p>\n
Read:
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SA auto industry faces threat from shift towards imported vehicles<\/p>\n
Instead, Kirby explained, the company seeks to offset inflationary increases in input costs for new vehicles.<\/p>\n
\u201cWe\u2019ve been very aggressive in not pricing in the last two years and taking minimal pricing,\u201d he said on the sidelines of TSAM\u2019s annual State of the Motor Industry briefing.<\/p>\n
Inflation management<\/strong><\/p>\n 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.<\/p>\n \u201cWe are not seeing the benefit of the strong rand yet. It\u2019s still coming through.<\/p>\n<\/blockquote>\n \u201cAs that comes through, we are hoping that we will be able to restrict what would normally be an inflationary-linked price increase,\u201d he said.<\/p>\n In the past, when the rand has been depreciating in value, vehicle manufacturers have sometimes announced quarterly price increases.<\/p>\n Read: Kirby added that TSAM\u2019s 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.<\/p>\n ADVERTISEMENT<\/p>\n CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n \u201cBut 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\u2019s good news for the end consumer,\u201d he said.<\/p>\n High tax burden\u00a0<\/strong><\/p>\n 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.<\/p>\n Barnes added that the tax burden on a car costing over R800?000 is 34%.<\/p>\n \u201cThe government secures huge fiscal benefits from the automotive market. If that market declines, it is going to have serious fiscal consequences in terms of the revenue flowing into the government,\u201d he said.<\/p>\n<\/blockquote>\n But Barnes said there are also serious economic consequences for the industry if it is overtaxed or if the market is being penetrated too aggressively by imported vehicles that do not have the underlying value addition.<\/p>\n This is a reference to the recent influx of cheaper imported vehicles into the South African market, particularly from India and China.<\/p>\n Barnes added that South Africa\u2019s automotive industry creates R120 billion worth of direct gross value added just through seven vehicle assemblers.<\/p>\n Read: He said the government is trying to balance the tension between what is good for production and ensuring the market is not negatively affected by creating too much protection for the local industry that would allow for some form of price advantage that the consumer ultimately has to bear.<\/p>\n Kirby said the tax paid on new vehicles is historical but \u201cit needs to be looked at\u201d.<\/p>\n<\/blockquote>\n He noted that while the automotive industry receives strong industrial policy support, another arm of government taxes the sector disproportionately.<\/p>\n \u201cUnfortunately, there is a discord between the different organs of state,\u201d he said. This is a reference to the Department of Trade, Industry and Competition (dtic), which develops policy for the automotive industry, while National Treasury is responsible for taxation issues.<\/p>\n ADVERTISEMENT:<\/p>\n CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n Vehicle sales<\/strong><\/p>\n Kirby was bullish about total new vehicle sales in 2026, forecasting a growth of 5.5% to 630 000 units.<\/p>\n In 2025, total industry sales grew by 15.7% to 596 818 units, finally surpassing pre-Covid-19 levels recorded in 2019.<\/p>\n Kirby said the seasonally adjusted annual rate of growth in new vehicle sales in January 2026 was just under 600 000 units, which means it is forecasting that sales in the second half of the year will be much higher than in the first half.<\/p>\n Listen\/read: Kirby highlighted that there was \u201cartificial growth\u201d in new vehicle sales in 2025. He said GDP growth of 3.5% would have been needed for the industry to achieve a net increase of 15.7% in new vehicle sales, and average prices remained the same.<\/p>\n However, Kirby said South Africa only achieved GDP growth of 1.2% last year.<\/p>\n \u201cEssentially what happened last year is that the A-segment, or entry-level market, grew faster than the other segments \u2013 the B, sub-B, C and D volume segments of the passenger car market \u2013 [and] within each of the segments, it was the entry-level models that grew faster than all the others.<\/p>\n \u201cIt created artificial growth in volumes. If you look at the true value, we did not grow by 15.7% at all, and this reflects just how constrained consumer spending is.<\/p>\n \u201cThere are some green shoots [in new vehicle sales] but we need to put that 15.7% in perspective,\u201d he said.<\/p>\n Kirby also expressed concern about new vehicle exports, despite the industry achieving record export sales of 400 000 units in 2025.<\/p>\n<\/blockquote>\n He said South African new vehicle exports to the European Union (EU) and UK are expected to decline because of regulation changes in that market related to their zero-emissions vehicle policies.<\/p>\n ADVERTISEMENT:<\/p>\n CONTINUE READING BELOW<\/p>\n<\/p><\/div>\n<\/div>\n Read:\u00a0How SA auto manufacturers can take advantage of global shifts<\/p>\n Kirby said this will make it very difficult for South Africa\u2019s automotive industry to sustain export volumes at current levels. \u201cWe are most likely in the next five years going to see a significant decline in exports to Europe and the UK,\u201d he said.<\/p>\n Local manufacturing <\/strong><\/p>\n Kirby added that to improve the competitiveness of South Africa\u2019s automotive industry, domestic policies need to adapt to the changes in the world, improve the competitiveness of completely knocked-down (CKD) manufacturing, and move back to a situation where between 40% to 50% of the vehicles sold in South Africa are manufactured locally.<\/p>\n Read: He noted that only 33% of all vehicles sold in South Africa in 2025 were locally manufactured.<\/p>\n Kirby emphasised that the automotive industry also needs to transition quickly to new energy vehicles (NEVs), which will require government support and targeted interventions.<\/p>\n<\/blockquote>\n He stressed that responding promptly to the challenges posed by declining export volumes and structural issues through policy measures \u201cis now absolutely crucial.\u201d<\/p>\n Read: The dtic considers ad valorem tax changes to lower car prices<\/p>\n \u201cIf we make the right small changes in the right way, creating the right investor confidence, we have the potential to increase vehicles sold to the domestic market by 20% and vehicle exports by 20%, which would generate R21 billion in manufacturing value addition to the South African\u00a0 economy.<\/p>\n \u201cThat is significant and we can generate 14 500 direct jobs,\u201d he said.<\/p>\n Follow Moneyweb\u2019s in-depth finance and business news on WhatsApp here.<\/em><\/p>\n<\/p><\/div>\n\n
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