Another sign that money is tight for households in South Africa

The National Association of Automobile Manufacturers of South Africa’s (Naamsa) New Vehicle Sales stats for April 2023 show a year-on-year decline of 0.2% due to the shrinking disposable income of consumers amid record high headline inflation.

For the period under review, aggregate domestic new vehicle sales, recorded at 37,107 units, reflected a decline of 88 units from the 37,195 new vehicles sold in April 2022.

The main reason for this was the decline in new passenger vehicles, which decreased from 25,735 new passenger cars sold in April 2022 to 24,174 units in April 2023 – a year-on-year decrease of 6.1%.

Naama said that this resulted from severely financially constrained consumers’ affordability to purchase vehicles or to service their car loan repayments amid the cost of living crisis in 2023.

This sentiment comes as the latest Stats SA data shows that headline inflation increased to 7.1% from 7.0%, against market expectations that it would drop to 6.9%. Food & non-alcoholic beverages also continued to accelerate in March, with prices increasing by 14.0%.

This represents the most significant annual increase since the 14.7% rise in March 2009 (14 years ago).

However, the association added that domestic sales of new light commercial vehicles, bakkies and minibuses increased by 11.% year-on-year, from 9,562 units in April 2022 to 10,611 units during April 2023.

Sales for the industry’s medium and heavy truck segments also reflected a positive performance during the month, at 563 units and 1,759 units, respectively.

Medium commercial vehicles showed an increase of 95 units sold, while heavy trucks and buses had an increase of 329 vehicles, representing a year-on-year increase of 20.3% and 23%, respectively.

The total reported industry sales of 37,107 vehicles comprising dealer sales, rental industry sales, and sales to government and industry corporate fleets.

The breakdown of these four segments is as follows:

• Dealers represented 90.3% of sales, with an estimated 33,492 units sold.
• The rental industry represented 5.2% of sales.
• Government sales represented 1.7% of sales.
• Industry corporate fleets represented 2.8% of sales.

Notably, export sales increased by 1,026 units or 13.4% to 37,107 units in April 2023 compared to the 27,117 vehicles exported in April last year.

Despite a positive sign on the back of a decline experienced in February 2023, month-on-month export sales reflected a decrease of 2,380 units or 7,18% for April 2023 at 30,756 units, compared to the 33,136 export vehicle units recorded for March 2023.

Market forecast 

While some segments show positive year-on-year growth, the overall performance of vehicle and export sales has remained stagnant. Continued monetary policy tightening, domestic and global slowing growth, and energy shortages will continue to impact the industry’s overall performance moving forward, said Naamsa.

“The International Monetary Fund [IMF] announced that SA’s real GDP growth is expected to decelerate sharply to 0,1% for 2023, citing load shedding, amongst other related supply shocks,” it said.

“These observed economic turbulences and the record-high headline inflation will likely trigger a further SARB Monetary Policy Committee interest rate hike in May 2023. For this reason, Naamsa expects the domestic vehicle market to remain reserved for the greater part of 2023,” it added.

In light of the sombre economic expectations, Naamsa added that the automotive industry pledged substantial investments to President Cyril Ramaphosa’s 5th South African Investment Conference in April 2023, specifically focusing on renewable energy projects, vehicle production, infrastructure and industrial zone developments.

“This is to enhance domestic investment and economic growth and generate full and productive employment for the country,” said Naamsa.

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