South Africa’s new vehicle market continued to decline in May, with total industry sales of only 42,907 new vehicles sold, down 10.3% from 2015 data, according to the National Association of Automobile Manufacturers of South Africa (Naamsa).
Naamsa noted declines of 12.9% and 5.3% for passenger cars and light commercial vehicles, respectively.
Passenger vehicles declined to 27,143 in May 2016, from 31,161 over the same period in 2015.
According to WesBank, sales through the rental channel have started to normalise, after seeing significant growth during the first months of 2016.
Rental sales in May were down 5.9%, however this channel’s year-to-date growth is still at a healthy 48.7%.
New vehicle sales through the dealer channel remained relatively robust, ending the month at 2.5% down on the same period last year. This was largely as a result of pent-up demand for new arrivals in the Light Commercial Vehicle (LCV) segment.
LCV sales through the dealer channel grew 15.4%, year-on-year, the financial services firm said.
“New model introductions by OEMs are helping to boost sales in an otherwise weak market, which has seen a definite shift to the pre-owned space,” said Simphiwe Nghona, CEO of WesBank Motor Retail.
WesBank said its own data reflects the performance in the dealer channel. Consumer demand for credit remains robust, with new vehicle sales applications down by only 0.2% in May. However, the continued shift to the used market is evident.
Wesbank data showed that application volumes for new vehicles amounted to 38,343, versus 89,390 for used vehicles.
Vehicle sales by channel:
- Dealerships: 32,815
- Rental: 1,609
- Government: 445
- Single sales: 1,387
The top three selling passenger vehicles in May were the Polo Vivo, the Polo and Fortuner.
The weaker Rand has resulted in continued new car price inflation and this has caused consumers to shift to the used car market, Wesbank said. Consequently, demand for used cars – as measured by application volumes – grew 9.5% in May.
These supply demand dynamics have subsequently seen used car prices increase and in May the average transaction value for a used car financed through WesBank grew by 7%.
WesBank’s forecast for 2016 sees total industry new vehicle sales declining 12% for the year. This will also be fuelled by changes to the interest rate and higher living costs faced by consumers.
This year the interest rate has been hiked by 75 basis points, while petrol and diesel prices have risen 7% and 12%, respectively.
“In the current market consumers will find themselves either having to hold onto their cars for longer, before replacing them with a new model, or taking their budget to the used market,” said Nghona. “This focus on affordability highlights the pressure on consumer budgets. The cost of motoring is on the rise, and will start playing a bigger role going forward.”