Mazda's new dealership at The Glen Shopping Centre in the south of Johannesburg. Image credit: Mazda/Supplied
(The Post News) – The top boss of Mazda South Africa has given a sharp warning to Chinese car makers who are entering the local market. He warned them about serious dangers related to cannibalisation and bad resale value, which might lessen their future opportunities.
In a latest discussion, the head of Mazda SA recognised the surge of competition from Chinese brands but doubted if their tactics could last in South Africa. He mentioned that although new competitors have introduced fresh choices and lower prices, they are joining a market where buyer trust is determined not only by price but also by how much value remains when reselling.
“If your brand’s products do not have good resale value, it weakens the trust of consumers,” he mentioned. “Buyers in South Africa don’t only consider the price at purchase. They also concern themselves with what that vehicle would be valued at after five years.”
Mazda Warns Chinese Brands of Cannibalisation Risks
Resale value, or residual value as some call it, is a very important thing to think about when buying stuff in South Africa. People already struggling with the increasing cost of living usually focus on how affordable things will be over time. Cars from well-known brands like Toyota, Volkswagen and Mazda maintain their worth partly due to their proven track record of reliability, trusted service systems and many years of loyal customers. Chinese newcomers still have to create that trustworthiness and Mazda until this is achieved, a lot of consumers continue to be reluctant.
Also, banks and financial institutions have a part to play. The residual value has an impact on how lenders assess risk, which then influences the terms of financing. A brand with unclear resale values might be left out from preferred finance choices. This creates one more challenge for buyers who seek assurance that their investment will not lose its worth drastically.
The CEO of Mazda SA also mentioned worries about the problem of cannibalisation among Chinese brands. With many car manufacturers introducing products at same price ranges, there is a risk that they could compete with each other instead of making their overall presence stronger together. He said this type of internal competition can cause decreasing profits, marketing exhaustion and weakening brand strength. In a market that is already full, it also causes confusion for customers when they have to choose from many models that look nearly the same in design, features and cost.
Industry specialists suggest that Chinese car manufacturers need to concentrate not only on competitive pricing but also other aspects for them to achieve success in South Africa. Key factors such as after-sales service, brand trustworthiness and sustained value retention are important. If there is a lack of enough service centers, dependable warranties and availability of spare parts, it will be hard for consumers to have confidence in new participants. Similarly, if these brands do not establish a history of being durable and dependable, they will struggle to gain loyalty in the second-hand market.
But, the obstacle is not impossible to overcome. Certain global brands have employed methods like trade-in assurances and buy-back schemes to give customers peace of mind and keep second-hand value intact. Possibly Chinese car manufacturers, supported by substantial resources and world aspirations, could think about using these kinds of efforts to dispel doubts.
The auto market in South Africa has always been lively and the introduction of Chinese brands has provided consumers with more options. However, Mazda’s chief executive thinks that tradition and customer trust still matter. In his view, a good resale value is not just about money but also shows how much confidence customers have in a brand. He mentioned that purchasing a car is generally the second most significant buy after a house. He also noted, if customers sense that their vehicle’s value drops rapidly, they will reconsider before making such decision again.
People watching the market think that Chinese brands won’t slow down. Rather, they will likely increase their efforts by putting money into dealerships, service facilities and advertising to gain trust. The true challenge will happen in a few coming years when we see if buyers believe these cars keep their value during second-hand sales.
Currently, the leaders of Mazda have a clear message: Chinese brands might find it difficult to maintain success in South Africa’s very competitive car industry if they do not address two problems – cannibalisation and resale value.
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