Another sign South Africans are down and out
The financial strain due to high interest rates and a sluggish economy has filtered through to business in South Africa, with many shying away from buying new cars, while Absa noted demand across the consumer base is depressed.
According to figures released by Naamsa, January sales registered 41,636 new vehicles, 3.2% ahead of December sales but 3.8% down year-on-year.
South Africa’s vehicle market breached 530,000 in 2023, with only a 0.5% growth rate, which is flatter than expected and a real sign of the economic pressures being experienced in the country.
But with five months of consecutive slowdown in volumes towards the end of last year, along with a relatively softer January performance, the outlook for 2024 volumes looks lucky to show any growth at all.
The biggest losers in January sales were passenger cars, the largest share of new vehicle sales. Passenger cars lost 6.7% year-on-year, or 2,073 units, to sell 28,790 units – more than the 1,658 total volume decline across the total market.
WesBank warned that economic headwinds remain a very real concern for household income and the motor industry at large.
“Indebted consumers will have been relieved by the fourth consecutive hold on interest rates during January, which will continue to help buying power in the market and hopefully increase levels of demand as buying confidence restores,” said Lebo Gaoaketse, Head of Marketing and Communication at WesBank.
However, he added motorists remain under pressure in the total mobility basket.
“With interest rates stable, but still high, fuel price increases expected during February, consumer price inflation still on the high end of the target band, and elections looming, economic uncertainty is the reality for most households and businesses and potential new vehicle buyers will remain wary of big financial commitments.”
The sentiment of suppressed consumers is now being felt across the country. According to Absa, its PMI data for January 2024 plunged as demand and activity faltered, alongside new vehicle sales and exports.
Outside of the global financial crisis in 2008/09 and the pandemic-induced lockdown period of 2020, the index has only fallen to this low level a handful of times.
In addition to the collapse in activity and demand, the inventories index declined once more in January to reach the lowest level since mid-2020.
On Monday (5 February), the S&P Global PMI for January will give some indication of whether the weakness reflected in the manufacturing PMI and naamsa vehicle sales was also visible in other sectors of the economy.
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