New vehicle sales volumes are forecast to be significantly lower in 2016 compared with the almost 618,000 units sold in 2015, according to Wessel Steffens, managing executive at Absa Vehicle and Asset Finance.
The most important factors that will affect new vehicle sales this year, in his opinion, include economic growth, interest rates, household and business financial conditions and levels of confidence.
In its latest report the National Association of Automobile Manufacturers of SA (Naamsa) said it expects passenger car sales to be down by 9% in 2016, with new commercial vehicles sales forecast to be down by between 3% and 5%.
Entry-level passenger cars, new model releases and manufacturer incentives will continue to be the main contributors to new vehicle sales volumes for the rest of the year. Naamsa expects new vehicle exports to grow by about 12% to approximately 375 000 units in 2016.
It foresees that exports will be driven by global economic growth and manufacturers’ export programmes. An expected weaker rand exchange rate towards year-end will give further support to vehicle export competitiveness, said Steffens.
New vehicle exports, however, dropped sharply by 21.9% y/y and 25.2% m/m to a total of 13 057 units in January.
Steffens added that inflationary pressures due to expected further interest rate hikes over the next 12 to 18 months, will affect the affordability, demand and growth in vehicle finance.
New vehicle price inflation is, therefore, set to remain under upward pressure due to expected further rand weakness in 2016 to 2017.
“Consumers continue to struggle in obtaining and affording credit for higher-priced vehicles, with the demand for favourably priced entry-level vehicles and good-quality used vehicles remaining strong,” said Steffens.
According to Naamsa, a total of 48,615 new vehicles were sold in the South African market in January 2016, which were 552 units and 1.1% less than total sales volumes in December last year.
Sales were down by 3,613 units in January compared to a year ago, resulting in a decline of 6.9% year-on-year (y/y).
Of total industry sales of 48,615 units in January, 75% represented dealer sales, 18.4% represented sales to the vehicle rental industry, 4.4% of sales were to corporate fleets and 2.2% represented sales to the government.
Passenger car sales amounted to 34 ,36 units (71.9% of total vehicle sales) in January, which were 6.1% less than in January last year, but 5.8% higher than in December.
Commercial vehicle sales were down by 8.9% y/y in January, with light commercial vehicles sales (24.8% of total vehicle sales) declining by 8.3% y/y and 11.9% month-on-month (m/m) to a total of 12 074 units.
As for vehicle finance, the Naamsa report indicates that vehicles are currently mostly financed over a 72-month period with used vehicles only marginally impacting the average financing term.
“The main driver of this remains affordability, but it has the downside of an ever-increasing average contract period, which continues to lengthen the vehicle replacement cycle,” said Steffens.