A quick glance at automobile prices reveals that most manufacturers have steadily been increasing their asking prices over the past two months or so. Their reaction to a depressed market seems to be universal: just raise prices! Each month it seems we are faced with price hikes.
Questions have been asked about how it is that a car like the Golf GTI for example, which was launched in April 2005 at a price of R240 000, now comes in at throat-choking R313 000 standard with the 6-speed manual. The DSG version will set you back R327 500 without sweet features like satellite navigation and sunroof. At the height of its success VW was moving about 250 new GTIs off the showroom floors every month.
Strangely the new Volkswagen prices reflect that the 110kW baby Polo GTI costs R241 000 brand new, only R1 000 less than the Golf GTI three years ago. Even more peculiar is that the bigger Jettas cost less than their equivalent Golfs. For example the Jetta 2.0TFSI with the same 147kW GTI engine retails at a highly significant R11 000 less than the hatchback GTI!
At a time when people clearly cannot afford to buy new cars (the market is down some 30% year-on-year again for the month of March) how can a big automaker such as VW make a mockery of the recession?
According to the General Manager of Communications at VW Bill Stephens, the 26% depreciation of the Rand to the euro in the last year is the main culprit for these latest increases.
“This has forced us to take pricing moves at a time when it is certainly not in the consumers’ best interest. The alternative is a situation where the more cars we sell, the more money we lose!” says Stephens.
Being a mass producer of cars unlike Lamborghini which only has to sell a few hundred cars a year to survive, how will VWSA continue to stay in business after hiking prices to such levels? Well over 900 workers have already been laid off/ retrenched by the company since December 2008. Production has also been cut at its Uitenhage plant.
“Bear in mind that despite our export contracts, we remain net importers,” stated Stephens, “hence Volkswagen’s drive to localise the manufacture of components from current local content levels of approx 40% to levels of at least 70% - this is critical to the viability of the OE Manufacturing industry in the med to long term.”
I’ve always wondered if the consumer’s sometimes-excessive demands on the motor industry (I want a more powerful lightweight car with LED lights, electric sunroof, ABS, parking sensors...) has been the reason for cars being priced so high. Or is it price of the base commodities which are used to build them like steel and platinum? Or maybe it’s the automakers themselves who are always trying to extract more and more profits from the exact same cars, year after year?
Whatever the case may be it doesn’t seem like the situation is going to get better any time soon. According to industry sources, only 3 out of 10 South Africans who apply for new vehicle financing will get it.
At the end of April the brand new Golf 6 will be launched in South Africa. You can bet your last vote that its introductory price will be higher than the current car's which is R217 000 for the 1.6-litre Trendline.
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