I recently did a factory tour of a local 4×4 accessories manufacturer who had gone from 100 employees at the start of 2020, to 400 employees at the end of 2021. The transformation blew my mind. The only effective word to describe it is: Gobsmacked.
And, believe it or not, this isn’t an isolated example. A number of well-known brands in SA have either merged, or been acquired by larger global companies. I also recently heard of a South African off-road brand that is potentially expanding into the US with a dedicated manufacturing plant in that country.
So what’s happened that’s different? Well, I think the answer is simple… lockdowns happened.
Once international borders were closed to air travel, people from all over the world suddenly found themselves sitting with a $10k to $15k overseas holiday budget that needed spending.
I recently spoke to a chap who – after his European trip was cancelled – he went out and blew R150k on kitting his vehicle out for camping. By his own admission, he had never gone camping in his life before.
Of course, the other reaction to lockdowns is that many people preferred the idea of camping outdoors, rather than staying in a lodge or hotel.
But the plot thickens…
Back in 2020, a number of developed nations had helicopter-dropped stimulus cheques into people’s bank accounts, while offering a rent moratorium that excused citizens from having to pay their rent.
I read of one particular bloke who bought himself two new power boats because he was still collecting a salary, a stimulus cheque, and he had decided not to pay his rent.
And so, the demand for roof racks, fridges, draw systems, canopies and roof-top tents went berserk in 2020 and 2021. All the while, the supply side of the chain got squeezed.
More demand = less supply = rising prices. As inflation reared its ugly head in mid 2021, manufactures started raising their prices in order to compensate for their own input costs.
Now, if you’ve ever studied inflation you’ll know that, although inflation is often kick started by a supply-chain issue, the driving force thereafter is generally due the public’s perception that prices are rising, therefore: “I can’t afford to wait and save for my new bull-bar, I need to buy it now on credit, before the price goes up even further”.
And that’s how the snowball gets bigger. Because, as people pull the purchase decision froward by buying on credit, it creates even more demand, less supply, more price increases, and even more credit-driven demand. Historically, the only way to break this cycle is for interest rates to climb to a level that discourages credit buying. But that in itself creates its own set of problems.
So what’s the good news and bad news in all this?
The good news is that as the industry continues to grow, more players will enter this space in order to capitalise on the opportunities. That means more R&D, more innovation, more content creators, more 4×4 owners, and more accommodation offerings that cater specifically for a booming 4×4 market. Everybody wins.
The bad news is that more people will get themselves into debt, and, prices are probably going to keep climbing from here until interest rates noticeably rise. Of course, if that does actually happen, you’re likely to find a number of irresistible bargains if you’re liquid enough to move on them.
So the question is: Do you buy into the panic now before things get too expensive, or do you take the risk of waiting? Decision, decisions, decisions. Comment below to share your thoughts.
Either way, I’m happy to see new life come into the 4×4 scene, which, had arguably peaked the last time in 2007… just before interest rates spiked.