New cars to cost up to 10% more within months – CMH


JSE-listed vehicle retailer Combined Motor Holdings (CMH) expects new vehicle prices to increase by up to 10% within the next four months.

“We will probably get increases of 2% to 3% almost every month and this knock-on effect is directly because of the exchange rate,” said CMH CEO Jebb McIntosh on Wednesday.

Read: Rand flat ahead of inflation, retail sales data

“The exchange rate has moved from R15 to R18 [to the US dollar]. You can work that out percentage-wise, but it’s more than 10%,” he said.

McIntosh believes these price increases will happen “fairly quickly”.

“In fact, those price increases have started already. I think we have had two lots from some manufacturers already in the last couple of months.

“So you can expect another few or so through to January in my opinion,” he said.

Poor timing for Proton debut

CMH has been appointed importer and distributor of Malaysian-sourced Proton products, with the South African launch of the new Proton models taking place last month.

McIntosh highlighted the problems created by the recent depreciation of the rand against the dollar when Moneyweb asked about the rationale of launching a new brand in SA in a tough economic period, when consumers tend to favour purchasing more established vehicle brands.

He agreed that this is not the best time to launch Proton in SA, but said CMH had been working on the ‘Proton project’ for 15 months before an agreement was finalised.

McIntosh said the pricing of the Proton models that it will be selling in SA will be about R50 000 higher than CMH would have liked.

“But we priced these units originally at R14.80 to R15 to the US dollar and unfortunately we have had to price them at R17 to the US dollar at this stage,” he added.

“We have some cover from the Malaysians on this but it’s challenging.

“But everyone else’s prices are now moving very quickly.”

Price increases hitting all marques

The imminent new vehicle price increases follow TransUnion revealing in August this year that the rate of change in new vehicle prices declined to 3.9% in the second quarter of 2022 from 6% in the first quarter of the year.

This was despite Statistics SA reporting in that same month that headline consumer inflation accelerated to 7.8% in July 2022, the highest level since May 2009, from 7.4% in June this year.

The statistics agency reported on Wednesday (19 October) that the headline consumer price index rose 7.5% in September from a year earlier, compared with a 7.6% increase in August.

Econometrix chief economist Azar Jammine said in August that the lag in vehicle price increases to rising inflation is a classic example of vehicle manufacturers not wanting to lose sales and also explains why new vehicle sales were holding up so well on a year-on-year basis.



CMH on Tuesday reported a 12% rise in revenue to R6.15 billion in the six months to end-August from R5.5 billion in the prior corresponding period.

Operating profit improved 45% to R372.3 million from R256.1 million.

Headline earnings per share grew by 51% to R3.02 from R2.

A dividend per share of R1.68 was declared – 53% higher than the R1.10 per share dividend declared in the prior period.

McIntosh said CMH is delighted with its financial results.

He said they were achieved in an extremely difficult macro-economic environment, with uncertain trading conditions.

McIntosh said new vehicle and parts supply shortages continued, petrol prices surged, there was load shedding of various degrees and the costs that go with it, six successive interest rate hikes in less than a year, more restrictive lending by finance houses, and the consumer has come under intense pressure.

New vehicle unit sales by CMH were nonetheless up 17% in the reporting period versus a national increase of 12%.

McIntosh said availability is improving and this is expected to continue – but used vehicle trading conditions have become tougher, with increased price pressures and declining volumes.

He said CMH’s car rental business First Car Rental “shot the lights out”, with profits up 169% year on year.

Since August, he added, CMH has increased its car rental fleet size by 66% and achieved revenue growth 90% in the reporting period.

Tougher times to come

However, CMH expects a tougher second six months to its financial year.

“Rising interest rates, and worsening power cuts, which have slowed the momentum of new vehicle sales, are set to continue to bring despondency to the economy,” he said.

“The improvement in the new vehicle supply chain will have mixed consequences. On the one hand, the customer waiting list will be eliminated for all but a select few models.

“However, the pressure by manufacturers on retailers to increase sales volumes in order to gain market share and reduce their inventory levels will intensify.

“Volume incentive schemes will drive trading practices and gross margins will be squeezed,” he said.

McIntosh added that the national new car market is not expected to show further month-on-month increases over the balance of the calendar year.

“Both the new and used vehicle markets face the pressure of rising interest rates coupled with a fall in confidence levels,” he said.

McIntosh believes national new vehicle sales will level out at about 500 000 for the year and “we are going to have an excess supply of new vehicles going into the new year”.

Shares in CMH declined by 2.99% on Wednesday to close at R27.55.

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