South Africans returned to buying new vehicles in 2017 as the used market declined

 ·10 Jan 2018

The new vehicle industry ended 2017 on a positive note, according to the annual sales data from the National Association of Automobile Manufacturers of South Africa (Naamsa). Despite December 2017’s year-on-year sales declining 2.4%, the year-to-date new car sales for 2017 grew 1.8%.

In total, 557,586 new vehicles were sold in South Africa during 2017.

“The new vehicle market’s positive performance for the last year was almost exactly in line with our forecast of 1.74% growth,” said Rudolf Mahoney, head of brand and communications at WesBank.

“This can be attributed to the rand being resilient in the face of volatility and the South African economy performing better than anticipated. However, the economy is still underperforming and faces a long road to recovery.”

In the second half of 2017, original equipment manufacturers (OEMs) were able to stave off price increases as the rand firmed against foreign currencies. This allowed manufacturers to pass value back to consumers through very attractive marketing incentives when purchasing new vehicles.

WesBank’s data for 2017 also reflected the continued shift back to the new vehicle market, especially when measuring demand through the number of vehicle finance applications received. Demand for new vehicles rose 6.4% in December, while demand for used vehicles slowed 0.2%.

Overall, demand for new vehicles grew 3% in 2017, while demand for used vehicles declined 1.5%.

Previous WesBank data showed that the current replacement cycle for new cars is at 44 months. The ageing carpark means consumers are ready to replace their vehicles before service and warranty plans lapse.

These consumers also want new cars that bring a promise of reliability as well as fuel-efficient technologies. For these buyers, the current marketing incentives from OEMs offer excellent value at a time when they are ready to replace their cars.

The lender said that many buyers are simply unable to shop in a used market where stocks are drying up, resulting in price inflation for used cars.

Read: Stocks drying up in SA used car market

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