New vehicle sales in South Africa shoot up – despite interest rate pain

 ·2 Jun 2023

The National Association of Automobile Manufacturers of South Africa’s (Naamsa) New Vehicle Sales stats for May 2023 show a year-on-year increase of 10.1% despite the shrinking disposable income of consumers and crippling load shedding.

For the period under review, aggregate domestic new vehicle sales, recorded at 43,060 units, reflected a significant increase of 3,959 vehicles from the 39,101 new cars sold in May 2022.

The main reason for this was the record export sales of 31,437 units from 19,007 sold in May 2022 – representing a remarkable increase of 12,498 units or 67.5% year-on-year.

“The new Ford Ranger and VW Amarok bakkies manufacturing boosted the vehicle export numbers for May 2023.

“The significant marginal difference in exports stats between May 2023 and low-base May 2022 was as a result of last year’s vehicle export knock-on effects of the severe flood disruptions in KwaZulu-Natal on the automotive supply chain and damages to the Toyota facility, along with a widespread decline in economic momentum around the globe, which weighed severely on vehicle exports,” said Naamsa.

Another substantial increase was noted in light commercial vehicles, bakkies and minibuses – showing a year-on-year increase of 38.5% or 3,564 units.

The May 2023 new passenger car and light commercial vehicle market reflected a stagnant year-on-year volume increase of 0.1% or 15 units for new passenger cars, recorded at 27,401 from 27,386 recorded for May 2022.

This reflects local motorists’ financial constraints in South Africa, such as rising interest rates and elevated fuel and food prices.

Sales for the industry’s medium and heavy truck segments also reflected a positive performance during the month, at 580 units and 2,254 units, respectively.

Medium commercial vehicles showed an increase of 15 units sold, while heavy trucks and buses had an increase of 365 vehicles, representing a year-on-year increase of 2.7% and 19.3%, respectively.

The total reported industry sales of 43,060 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 90.2% of sales, with an estimated 38,872 units sold.
  • The rental industry represented 4.9% of sales.
  • Government sales represented 2.2% of sales.
  • Industry corporate fleets represented 2.7% of sales.

Market forecast 

While some segments show record year-on-year growth, the most popular segment for South Africans – new passenger vehicles – 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.

“These ongoing negative domestic and global economic activities directly affect the production mechanisms of the industry and, therefore, the cost of doing business in South Africa,” it said.

The economic conditions facing consumers continue to place immense pressure on household budgets, and more of their impacts are yet to be felt as their ripple effect impacts other areas of the value chain, added WesBank.

The lender noted that while WesBank’s applications for finance increased substantially compared to last year, real changes in consumer behaviour are being felt in the level of affordability.

“WesBank’s deal duration has increased year-on-year, and the growth in the contract size is below inflation, meaning consumers are keeping their vehicles for longer and new vehicle sales are moving slowly towards cheaper vehicles,” it said.

Naamsa noted that load shedding is still the biggest threat to the industry and said, “A load shedding bound economy will cause irreparable harm to the automotive industry, which has become the successful cornerstone of industrialisation and development in South Africa.”

It also shared that the Naamsa CEOs Confidence Index reflected a gloomy outlook for nearly all of the automotive industry’s key performance indicators over the next three months.

“While the levels of demand remain reassuring for the new vehicle market, the economic effects will continue to take their toll on consumer budgets and ultimately have a bigger impact on the vehicle market moving forward,” added WesBank.

Read: The biggest roadblock for electric vehicles in South Africa – and it’s not load shedding

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