VROOM WITH A VIEW
The road ahead: Motoring trends in 2022
Motor industry trends we can expect to see next year include challenges with production supply chains and a rise in the popularity of electric vehicles.
What will the weather be like on the 23 August next year? It’s impossible to know in a system as complex and chaotic as that of the climate. Perhaps one of those glorious Cape winter days when the proteas litter a sun-drenched mountain and you wonder if there is anywhere as lovely on Earth? Or, perhaps, horizontal rain and airborne wheelie bins flying across Kloof Street as some giant and terrible storm sweeps up from the Roaring Forties?
We can’t know, but we can look at trends and make an educated guess. Here, in no particular order – and not to the exclusion of any others – are some motoring trends for 2022.
We can expect ongoing volatility across the industry as a result of the depredations of the Covid-19 pandemic. Commentators who know better than me (namely, The Economist) have said that the pandemic’s influence will wane throughout the year as the world comes to live with the virus, but it is not over yet, to say the least.
The shortage of semiconductors will continue to cause havoc in production supply chains and therefore supply of cars, with the concomitant impact on new car prices and the knock-on effect this has on used-car prices. Because car companies are unable to build their usual mix of products (as they are internally rationing chip supplies to high-margin models, usually luxury products), a strange side effect is that car sales data are generally less useful in terms of taking the temperature of global car markets.
Sales volumes are taking a battering, but this does not represent demand. Dealers can sell everything they can get their hands on, and there’s not a discount in sight. This is likely to continue into 2022.
Another potential source of new car price inflation is the Fed, which has indicated that the money taps will begin to cease splurging in such an exuberant manner. The rather crazy effect this has had on markets (infinite number of dollars, limited number of assets) is harder to understand.
There are some motor market caps that seem entirely unrelated to their abilities to build or sell cars – but I’m no market analyst and will simply say that cheap dollars on the hunt for yield might start considering their long South African holiday and go home. It takes courage to make any kind of bet on the rand, but if it weakens it has a quick and brutal effect on car prices.
Another development that will affect new car prices is the global growth of the agency model, which, in practical terms, means you can buy a car online directly from the manufacturer. Internal competition among dealers within the same brand has led to eroded dealer profitability, price uncertainty and consumer confusion about how much a car actually costs. It hurts residuals and damages brands. Agency models, whereby the manufacturer ceases to be a wholesaler and retails the car directly to the customer, using its dealer network as a facilitator, customer relationship manager and service centre, are likely to gain more ground in 2022.
As much as some dealers don’t like it, in the long run it is likely to be better for customers to enjoy the price certainty they’re used to with e-commerce and other luxury brands. You don’t play off three different iStores for the best price when buying an iMac, and motor manufacturers would like customers to feel the same way about their new VW Golf. It does all make sense, but in the short term it might feel like RRP is a bit steep. Too bad!
Globally, and to an extent here in South Africa, the relentless rise in popularity of electric vehicles (EVs) is not likely to abate. Like so many technological revolutions, in developed markets where there is regulatory support for greener technologies, in 2021 EVs reached a tipping point in various ways, specifically in total cost of ownership – they’re now cheaper to own over a full life cycle than an internal combustion car – and in terms of consumer behaviour as well. Enough people have got their bums in an electric seat and have experienced the benefits of electric motoring to make the shift.
The year 2022 will be notable for an ongoing surge in EV uptake globally, and there will be related snafus with charging infrastructure and so forth. But that genie is well and truly out of the lamp.
The acceleration of this trend will certainly continue to challenge manufacturers. Toyota has had to scramble an EV strategy for the European markets that are leading this charge, and Volkswagen has announced a big shake-up of its European production network to accommodate EV demand.
Despite my earlier comments on the usefulness of data at the moment, it’s nevertheless interesting that, in the UK in November, battery electric car sales grew 110% year on year and made up 20% of the market. Including plug-in hybrids, plug-in cars are now 30% of the UK market. It’s no longer the thin end of the wedge, really. It’s going to grow exponentially.
In South Africa, we will start to see more EVs on the road too. They will regrettably remain in the luxury space – it’s Rolls-Royce, Porsche, Audi, Mercedes-Benz and BMW that have the brand weight to absorb the government’s grotesque tax body blow of 26% that EVs are slapped with at the border.
Be that as it may, we’ll start to see EVs on the road in bigger numbers, and that’s a good thing. There’s some hope that an electric Kia could come our way (the EV6), but it would require the likes of you and me to enquire after it.
For me, one of the features of 2021 was the death of range anxiety. Apart from BMW, which won’t lend cars to DM168 to test, I’ve driven every electric car available in the country, and worrying about charging is just something that doesn’t happen any more.
For the wealthier consumers who can afford the new wave of EVs rolling silently into showrooms next year, 2022 will be the year that range anxiety and silly arguments about charging networks and load shedding start to die.
Finally, 2022 will be the year that the South African motor industry starts to get some sense of its future. Will the government adjust its regulations to support EV manufacturing and the development of an electric mobility ecosystem in SA (including the scrapping of crazy import tariffs on EVs)? We can only hope.
It’s also collective bargaining season again next year. Manufacturers and the National Union of Metalworkers of SA are likely to be at loggerheads.
Manufacturers will say, truthfully, that it is increasingly difficult to justify manufacturing operations so far from major markets when the cost advantage to building cars in South Africa is being eroded by rising logistics prices, collapsing port and rail operations, rising labour costs, wobbly global supply chains and increasingly unreliable volumes from the South African operations. They will say that wage increases need to remain linked to inflation.
The union will represent workers exposed to the full failure of health, transport, security and education operations run by the South African state, and will ask the manufacturers for more money, more leave and more support.
It’s likely to be a difficult conversation. DM168
This story first appeared in our weekly Daily Maverick 168 newspaper which is available for R25 at Pick n Pay, Exclusive Books and airport bookstores. For your nearest stockist, please click here.
Daily Maverick © All rights reserved