SEMA News -- April 2009

By Linda Spencer

Affordable U.S. Products Designed to Fit Region’s Market Sought

South Africans seek functional off-road accessories rather than those for show, given the serious off-roading excursions undertaken by many enthusiasts. Among the top-selling products for SUVs are protective and stylized aftermarket products, such as bull bars; recovery products, such as winches; performance products, such as engine enhancements; and traction products, such as specialty off-road tires and suspension. Courtesy of Leisure Wheels

For the last eight years, the activity of accessorizing and improving the performance of vehicles has transformed from a hobby to a fully fledged culture of fierce competition,” said Jaisivir Sewpual of the U.S. Embassy in Cape Town, South Africa. “In the race to individualize and distinguish their vehicles from others, enthusiasts constantly seek innovative, authentic specialty components and accessories. In this lucrative segment, South Africans are highly receptive to U.S. brands and often follow trends set in the United States.”

A group of journalists from leading South African enthusiast magazines along with a team of importers/distributors provided their insights into the market through a joint U.S. Embassy/SEMA survey that the embassy carried out over the past six months. The middle class in South Africa—especially the black middle class—has been a driving force in the growth of the specialty-equipment market.

“The emerging black middle-class segment of the South African population is not only satisfied with a new vehicle, but will spend considerable amounts of money customizing and accessorizing their vehicles,” Sewpual said. “Their need to be different and to distinguish themselves and their vehicles is incredibly high. Due to this demand, there has been a surge in the number of new automotive styling and tuning retailers/workshops around the country.”

There is a lot of focus on aftermarket accessories in South Africa, said Minesh Bhagaloo, a journalist for some of the largest daily newspapers in South Africa, including The Star, The Pretoria News and Cape Times, but affordability is critical. Buyers are very price conscious, as disposable income levels are still modest. As several distributors noted, higher-priced items are often out of the reach of most South Africans, and minimum order requirements often are a frustration to the typically smaller-sized importer.

European and Japanese cars are among the most often customized, such as this highly accessorized Honda. Courtesy of Top Car

This problem has gotten worse because the global crisis affects the car and tuning markets in South Africa, which had enjoyed a number of years of strong growth. The National Association of Automobile Manufacturers (NAAMSA) reported on its website that increasingly tight credit and the negative wealth effect of the global financial crisis resulting from falling house prices and asset values, sharp falls in business confidence and consumer sentiment have sharply curbed vehicle sales in this market of 4.6 million vehicles over the past several months.

One importer noted that it is even more critical these days that overseas manufacturers price their products by taking into account poor exchange rates, customs duties on certain items and freight. All are factors to be considered, but only products that can be reasonably priced will succeed. Also, the cost of an item can be prohibitive, even though it may be a sought-after item.

The South African vehicle market has indeed slumped in line with the international economic slowdown. Specialty-equipment businesses are obviously affected by this, as are all other business sectors.

BMW 3 Series

While the economic crisis has quelled demand across the board, the customization market for SUVs and off-road vehicles remains one of the strongest. Neil Harison of SA 4x4 magazine ventured a guess that the light-truck/off-road side of the market totaled 30%–40% of the overall South African specialty-equipment market. South Africans seek functional off-road accessories rather than those merely for show because of the serious off-roading excursions undertaken by many enthusiasts. Among the top-selling products for SUVs are protective and stylized aftermarket products, such as bull bars; recovery products, such as winches; performance products, such as engine enhancements; and traction products, such as specialty off-road tires and suspension. “However, there is a large demand for off-road trucks and SUVs due to the country’s large open spaces,” Angus Thompson, deputy editor of Top Car South Africa, said. “On the SUV and off-road side of things, it’s the older people with money who are buying the products that will enable them to do overlanding or camping in the bush. This is also growing in popularity as more and more South Africans use their 4x4s to explore not only their own country, but also the rest of Africa.”

Honda Civic

Jannie Herbst of Leisure Wheels said that SUVs and light pickups for overlanding and adventure form about 95% of the market his publication caters to.“In our magazine’s specific market, where we focus on overlanding adventures and lifestyle-oriented vehicles, that would be the Toyota Hilux pickup; Land Rover Defender; Toyota Land Cruiser Prado, 70 and 200 series; Mitsubishi Pajero and Nissan Navara pickup,” Herbst said. “The remaining 5% is made up of vehicles, such as the Land Rover Defender, which is still sold new here, and the Toyota Land Cruiser 70 wagon, which are dedicated overlanding-type vehicles.”

Thompson added that young guys with relatively little disposable income form the majority of those modifying their cars in South Africa. Among the most popular cars to accessorize are the BMW 3 Series, Honda Civic, Nissan 350Z and Volkswagen Golf.

Most of the cars on South African roads are European, Japanese or Korean brands, while American brands, such as Jeep, Dodge and Cadillac, sell in smaller numbers. Bhagaloo also emphasized this aspect of the market.

“We don’t have the range of American cars that you do,” he said. “Our market is probably more German and Japanese. Your aftermarket offerings need to factor this in. See www.naamsa.co.za for our monthly car-sales figures.”

Nissan 350Z

Many of the U.S. brands sold in South Africa are European rather than U.S. specs. Australia, Japan, South Africa and the United Kingdom drive on the opposite side of the road compared to in the United States, necessitating fitment changes in a number of U.S.-made accessories.

Those interviewed for the U.S. Embassy/SEMA study highlighted the challenges faced by the specialty-equipment industry. Unlike in many other markets, government regulations did not make it on the short list of problems. We were repeatedly told that South Africa’s legislation demands only that a vehicle be road-worthy, and there are effectively no limits on customization.

“The only legal restrictions we have pertain to the amount of noise certain aftermarket exhausts and mufflers make as well as the degree of window tinting,” Thompson said, “but this is seldom enforced by the authorities.”

Volkswagen Golf

Far and away the largest challenge faced by South African companies was counterfeit products. Businesses representatives and journalists alike noted the increasing number of inferior and cheap products flooding the market. They also said that U.S. products are more expensive in the South African market due to tariffs ranging between 5%–30%. This significantly raises the cost of U.S. products and puts American manufacturers at a disadvantage against competitors in countries in which South Africa has free-trade agreements, including Europe. U.S. products are more expensive in South Africa due to the rapid depreciation of the local currency, the rand, with an exchange rate of 10.10 rand to $1 compared to 7.1 rand to the dollar 18 months ago.

“As in other parts of the world, the ‘new vehicle’ situation in South Africa is dire,” Herbst said. “Almost 5,000 vehicles are repossessed every month, and the used-car market is hugely oversaturated. Meanwhile, many specialty-equipment businesses are coming up with innovative ways to brave the storm. And our magazine recently posted its highest circulation figures for the fiscal year.”

A South African importer echoed that view, saying “…a company that can work around that obstacle will find themselves in a good position to penetrate the market.” He noted that U.S. products were present in the major South African cities of Cape Town, the seat of the national legislature; Pretoria, where the government executive branch is based; Johannesburg, known as the commercial capital; and Durban, a fast-growing port city on the east coast. The U.S. Embassy emphasized that personal interviews with local retailers and importers indicated their eagerness to identify and establish distributor agreements with U.S. suppliers.

Below are links to lists of some of the top importers/distributors and media in the South African market. Also, a new trade show will take place this spring—Automechanika South Africa in Johannesburg. More information is available at www.automechanika.de.

Enthusiast Media

A SEMA-compiled list of South African media is available to members online at www.sema.org/international.

Importers/Distributors

SEMA has a new list of distributors/importers available for members online at www.sema.org/international. The list was compiled from a number of sources, including a recent survey conducted for SEMA by the U.S. Embassy in South Africa as well as input from South African media.