Tax cut proposed for South African cars

South Africa’s car manufacturers have asked the government to reduce taxes on new vehicle purchases as part of a proposed stimulus package for the coronavirus-hit sector.

Reuters reports that the proposal has been mooted by the National Association of Automobile Manufacturers of South Africa (Naamsa) as a way of boosting the local sales of new cars.

Automakers want to lower the tax rate for new vehicles from 42% of the price currently to between 35% and 38%, Naamsa chief executive Mike Mabasa said.

Removing a tax on carbon dioxide emissions imposed at purchase and reducing an ad valorem levy – a value-based tax on items considered a luxury in South Africa – could together boost new sales by almost 28,400, Naamsa’s presentation showed.

South Africa’s car sales were significantly impacted by the coronavirus pandemic and have still not returned to pre-lockdown levels, sales data shows.

However, the country’s new-vehicle market showed signs of further growth in August, in line with the government’s move to open up the country’s economy over the past month.

Data from Naamsa found that overall volumes of new vehicle sales increased 1,119 units over July to 33,515. This is 26.3% down on August last year, considering the July market had declined 29.6% year-on-year.

“While this is by no means an immediate sign of recovery for the market, it is certainly a good sign of some stimulus,” said Lebogang Gaoaketse, head of marketing and communication at WesBank.

The volume shift in the market came from rejuvenation in government spend rather than consumer or business demand.

Growth of 63% and 82.5% in the passenger and Light Commercial Vehicle (LCV) segments in this channel accounted for 1,257 additional units compared to August 2019. The government channel accounted for 1,419 units in total, providing most of the impetus for the market’s volume growth in the month, WesBank said.

Dealer channel sales – which represent consumer and business sales activity and consequent levels of confidence – did show small signs of recovery, the lender noted.

Passenger car sales through dealers declined 15.9% year-on-year compared to the 18.7% decline in July, while LCVs were 21.1% lower than August last year versus 17.1% lower in July.

Overall, the passenger car segment recorded 19,545 sales, down 32.6% year-on-year. LCVs sold 11,336 units in August, 19.3% less than August last year. These remained largely in line with the July performance across both segments.

WesBank said it continued to experience an uptake on fixed rate deals thanks to the low interest rate environment. “A year ago, nearly two thirds of WesBank finance agreements were concluded on linked interest rates. During August, this split had shifted towards a more balanced picture of fixed- and linked-rate deals,” said Gaoaketse.


Read: All grades of fuel likely cheaper in South Africa next month

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Tax cut proposed for South African cars