Load shedding hits car sales with worse to come

As load shedding rocked consumer and business confidence in February, new vehicle sales continued to shed volume.

Industry sales declined 3,016 units compared to February 2018 according to the National Automobile Association of South Africa (Naamsa). New vehicle sales ended the month on 43,251 units, 6.5% down on the same month last year.

“While we expect first half sales to be slow, the market was no doubt rattled by the week-long impact of load-shedding at the beginning of the month, which impacted consumer and business confidence,” said Ghana Msibi, WesBank executive head of Motor.

“Reassuringly, however, February sales were up on January despite fewer selling days.”

Msibi added that the additional carbon tax and resultant increase in fuel prices during the month is expected to contribute to consumer behaviour in the longer term and their appetite for new vehicle purchases.

Passenger vehicle sales took the brunt of the market’s performance, declining 13.3% to 27,000 cars.

“Concerning is the slow-down in consumer demand as evidenced by passenger car sales through the dealer channel declining 14.4%,” says Msibi. “This is also reflected in consumer demand for Light Commercial Vehicles, despite this segment increasing.”

Having showed more resilience over the past few months than passenger cars, Light Commercial Vehicle (LCV) sales increased 7.1% to 14,123 vehicles. The dealer channel sales for the segment increased 4.4%.

“The performance of the LCV segment is reassuring. Not only is this segment up year-on-year, but is 2,423 units up on January, which remained flat on the previous month,” said Msibi.

The year-to-date picture remains sobering, however. “The market remains under enormous pressure and is down 7% on the first two months of last year,” said Msibi.

“This means a major turn-around is required to meet our forecast for the year of a 1% decline.”

Affordability in the market remains key to vehicle purchase decisions. “Extended contract periods, increasing numbers of balloon payment options within finance contracts, and a continued shift from new to used all indicate the overall picture of household budgets under pressure,” Msibi said.

The new to used car mix has shifted 9% towards used over the past 12 months. But Msibi said that a natural correction of the market is inevitable given the availability of quality used car stock.

“When consumers hold on to their cars for longer, there are fewer and fewer late model, low mileage used cars in the market. This will naturally force customers back into new vehicles over time, which is positive news for dealers and new vehicle sales.”

The top three best-selling passenger vehicles for February included the Polo Vivo (2,692, the Polo (2,036), and Smart (1,207), while Hilux, with 3,504 units, topped the LCV, and overall category, followed by Ford Ranger (2,578).

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Load shedding hits car sales with worse to come