The Department of Energy this week pushed up the price of petrol and diesel for June 2019 – due to a carbon tax rise, and a slight increase in the fuel levy.
The economy also suffered its worst quarterly growth figure since the 2008 financial crisis, with Q1 2019 GDP contracting by 3.2%.
Household incomes remain under pressure as salaries are expected to stretch further, said Ghana Msibi, WesBank executive head of motor.
“Consider that fuel price inflation year-on-year is 9.2%, while WesBank’s average deal size for new vehicles has increased more in line with official inflation at 4.8%,” he said.
“The difference in fuel price since January this year is as much as R2.77 for every litre of 93 unleaded – which gives a very real sense of how much further salaries have to go.”
The high petrol prices are also eating into South African sales which declined for the fourth time in five months in May.
Industry sales for May declined 5.7% to 40,506 units compared to May 2018, according to figures released by the National Automobile Association of South Africa (Naamsa).
“We had warned against hopes of a major turn-around last month,” said Msibi. “May sales return to a picture more representative of the rest of the year.”
He added that there were no winners in the various segment performances, apart from a marginal 0.3% gain in Medium Commercials.
Passenger cars declined 1.4% to 26,170, while Light Commercial Vehicles (LCVs) traded 13% down year-on-year.
While volumes month-on-month increased during May, this is as a result of a standard sales month versus April’s fewer selling days.
Despite these really tough trading conditions, demand appears to be more positive according to increased applications for both new and used finance according to WesBank data, said Msibi.
“Hopefully more certain trading conditions for the remainder of the year can convert this demand into deals.”