Another sign of life for consumers in South Africa
New vehicle sales reported their best performance of the year in October, giving another positive sign that South Africa’s fortunes are turning and that optimism is creeping into the market.
According to the sales data defom Naamsa, a total of 47,924 new vehicles were sold locally in October, marking a 5.5% increase compared to October 2023.
Of these sales, approximately 38,520 units, or 80.4%, were attributed to dealer transactions, with analysts attributing cyclical demand from the rental sector and an impressive performance from the passenger car segment as the main drivers.
October sales usurped July as the best-performing month by 3,695 units and were a significant 2,506 units ahead of October last year.
Finance group WesBank said the result “provides a strong start to the final quarter and aligns with expectations for an improved second-half performance from the market”.
“While positivity began creeping into the market during September, October new vehicle sales certainly provide signs of increased optimism,” it said.
“Rental and fleet volumes bolstered the market substantially, but an increase of 14.5% in passenger car sales overall indicates an uptick in consumer sentiment as the majority of these are retailed off showroom floors.”
The improved sentiment is being driven by a spate of positive news, not least some returned stability to the energy crisis, decreasing fuel prices, four consecutive months of declining inflation, and a stronger performance of the currency against global markets.
Interest rates were also cut for the first time in three-and-a-half years in September and most economists expect a further cut during November.
“These factors will – over time – provide much-needed relief for stressed household budgets. But they will take time to stimulate new vehicle sales while those same budgets recover from rising debt,” WesBank said.
WesBank noted that demand for credit is expected to increase, but that consumers should be careful of over-extending themselves in the euphoria of this light economic relief.
“Total cost of ownership is a vital consideration when purchasing a new vehicle. This has a substantial impact on affordability beyond the vehicle finance instalment.”
However, while October signifies a coming turn, on a year-to-date basis, the market is still down—sales for the 10 months are down 4.7% relative to the same period in 2023.
At 425,806 sales for the year so far, the market should comfortably exceed 500,000 units but would still result in a depressed market compared to 2023.
Major shift in the market
Brandon Cohen, Chairperson of the National Automobile Dealers’ Association (NADA), said that the reality is that the current economic landscape remains challenging for consumers.
“Although inflationary pressures have shown a positive decrease over the past few months and interest rates are trending downwards, it will still take some time to realise the benefits associated with this,” he said.
Cohen added that affordability is still a major concern for buyers. This pressure is evident nationwide. As a result, the group has seen a significant shift in the market in 2024.
“We’re witnessing competitive Chinese brands gaining traction, offering consumers affordable alternatives that are reshaping the market.”
Looking ahead, there are indicators that consumer spending could increase, partially driven by additional revenue collected by SARS through the new two-pot retirement system, which may lead to higher disposable income in the coming months.
Black Friday sales will serve as an early indicator of this trend, providing insights into evolving consumer behaviour as the year draws to a close, Cohen said.
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