Vehicle sales in 2022 are projected to continue on a positive trend as the South African automotive industry shows resilience.
The South African motor industry is off to a strong start in 2022 with total vehicle sales in January at 41,382 units – up 19.5% on the same period last year, said Mark Dommissee, chairperson of the National Automobile Dealers’ Association (NADA).
This marks a significant recovery in the market; a trend that is expected to continue in 2022 with growth projected between 10% and 15% and returning to pre-pandemic numbers this year.
Similar figures were echoed by Cyril Zhungu, the head of automotive retail finance Standard Bank, who said that growth should come in between 8% and 10% in 2022, with the market shifting approximately 500,000 new units.
Zhungu said that, based on the volume of applications processed for vehicle finance by Standard Bank, there is strong demand for vehicles in the country, with a number of local factors currently driving the trend:
- There is a strong preference for pre-owned vehicles, attributed to price sensitivity, vehicle price inflation and the general level of affordability in the market.
- There is an ongoing replacement trend, which is expected to continue throughout the year. Demand is being generated through vehicle model renewal and new vehicle model introductions, which remain a key factor in stimulating recent vehicle sales.
- Low interest rates following intervention from the South African Reserve Bank in 2020 created new demand. While rates are projected to rise, they remain on the low end.
- South African vehicle manufacturers, importers and distributors have become proficient at adapting to shifting consumer needs for support, services etc.
- The recovery of the hospitality industry has directly impacted the rental industry’s positive revival.
Zhungu noted that the supply-side backorders of components and chips that dogged the industry in 2021 are expected to settle down and also provide a stable vehicle sales projection for 2022.
Zhungu said that, despite the growing demand, an increase in consumer debt levels remains an issue in the market, as does the wider macro-economic environment.
“One cannot discount that there is an increase in consumer debt levels as reflected in the change of the country’s debt-to-disposable income ratio from 71.8% in 2018 to 77% which, together with a possible upward adjustment to cost of credit as interest rates normalise in 2022 on the back of higher consumer inflation, may affect the said projected growth in vehicle sales,” he said.
NADA echoed Standard Bank’s concerns and pointed to the predicted increase in interest rates by 1.5% as a significant hurdle in a country where consumers have more debt exposure than in previous years.
The association said that it is waiting to engage with the government on its plans to ease the doing of business in South Africa and ensure that the automotive industry remains sustainable.
Despite rising interest rates and fuel prices, the general outlook is brighter than at the same stage last year, the group said.