New vehicle sales in July may have shown a clearer sign of which levels of market activity should be expected as lockdown regulations ease and the economy begins opening up again.
WesBank warned, however, that it was too early to define any kind of trend or level of normality as the complexities and many unknowns of the developing pandemic continue to be felt.
According to the National Association of Automobile Manufacturers of South Africa (Naamsa), new vehicle sales declined 29.6% to 32,396 units compared to July last year. This shows some levels of improvement in the context of June sales, which were 30.7% down year-on-year for a market volume of 31,867 units.
“We had begun to see uptake on fixed rate deals last month thanks to the low interest rates, and it is interesting to note the significant change in the bank’s average deal duration in July,” said Lebogang Gaoaketse, Head of Marketing and Communication at WesBank.
WesBank data indicates a shift towards earlier settlements of deals in July. “We might have considered this as a result of consumers making affordability decisions in terms of monthly instalments, except that the bank’s average deal size is between 10% and 15% higher year-on-year across new and used,” said Gaoaketse.
WesBank’s data shows that the average value of a new car financed in July 2019 was R324,593. That has increased to R359,289 in July 2020.
“We will require more data before we can fully understand how buyer behaviour is changing.”
Indebted consumers benefited from another cut in interest rates during July as the Reserve Bank attempts to stimulate the economy and balance some level of relief against investment returns. But households were also faced with rising fuel prices of 7.5% despite the price being 20.9% lower than a year ago.
Consumer Price Inflation came in at 2.2% although the overall food basket increased 4.2% and many food groups in the car-buying market exceeded this amount, the lender said.
“This all continues to paint a picture of a hard-hit economy that will take some time to recover,” said Gaoaketse.
Passenger car sales fared slightly worse than last month, down 35.8% to 18,905 units compared to July last year. June sales had recorded a 33.4% year-on-year decline with 19,264 units sold last month.
Light Commercial Vehicle (LCV) sales, however, showed a dramatic improvement over June, which was down 29.7%. July sales in the segment came in 19.7% down on July last year to 11,123 sales. This was 934 more units than sold in June.
“It must be noted that not all segments of the market are contributing to sales as the market slowly re-opens,” said Gaoaketse. “The rental market is effectively dormant until such time as business travel and tourism return to some level of significant operation. Government sales, however, are only slightly lower (6.9%) year-on-year.”
Although WesBank retains a cautious approach for the remainder of the year, there is some reason for optimism: with these experienced levels of market activity amidst the peak of the country’s Covid-19 infection rate, more market confidence could be expected as the country begins to slow the onslaught of the pandemic.