South Africans have been pushed to the brink
A year of high lending rates, elevated inflation levels, and lower household income have meant South Africans can’t afford big-ticket items like cars, resulting in a fourth consecutive month of negative growth in domestic new vehicle sales in November 2023.
This is according to Naamsa’s latest New Vehicle Sales stats, which showed aggregate domestic new vehicle sales in November 2023 – at 45,075 units – reflected a decline of 4,911 units, or a fall of 9.8% from the 49,986 vehicles sold in November 2022.
Additionally, the November 2023 new passenger car market at 29,384 units had registered a significant decline of 4,052 cars, or a loss of 12.1%, compared to the new cars sold in November 2022.
Adding to this is the 3.9% fall in domestic sales of new light commercial vehicles, bakkies, and mini-buses, and the 13.5% loss in sales in the medium commercial vehicle segment.
Concerningly, the Bureau for Economic Research (BER) noted that this was significantly worse than the consensus forecast and the fourth consecutive annual decline in new vehicle sales.
Naamsa added that the new vehicle market bore its most significant losses during November since the beginning of 2021, when the market was beginning its slow recovery from the COVID-19 pandemic.
“Sales were 1.3% below the pre-pandemic level of 2019 at the beginning of 2023. For the year to date, it was now 0.6% ahead of the same period in 2022, which means that, depending on the December sales figures, it could miss out on returning to the pre-pandemic level after three years,” it said.
Wesbank noted that the prolonged high cost of borrowing, elevated levels of inflation and the continued impact of load shedding have hit indebted households.
“The high lending rate, combined with high inflation and relatively lower household income, will continue to restrict big-ticket purchases such as new vehicles,” said Lebo Gaoaketse, Head of Marketing and Communication at WesBank.
Wesbank highlighted that this was also evident in the demand for second-hand vehicles.
“Year-on-year increases in deal duration (how long customers hold onto their vehicle for) and contract period (the length of the finance agreement with the bank) both indicate a constrictive environment to new vehicle purchases.
“This is driven by the affordability of instalments in the monthly household budget and the uncertainty of the myriad of socio-political headwinds facing consumers,” it said.
It also noted South Africa’s need to escape Eskom and load shedding contributed to households’ financial stresses.
“The volatility of the energy crisis also continues to weigh on consumer and business confidence. Those restricted household incomes and business revenue streams are prioritising an alternative energy solution before a new vehicle purchase,” said Gaoaketse.
The total reported industry sales of 45,075 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 84.8% of sales, with an estimated 36,468 units sold.
- The rental industry represented 9.5% of sales.
- Government sales represented 3.1% of sales.
- Industry corporate fleets represented 2.6% of sales.
One silver lining was shown in export sales. The November 2023 aggregate export sales continued in line with general industry expectations and increased by 25.5%, recorded at 41,660 units compared to the 33,207 which were recorded for November 2022 export units. The export market growth supported the light commercial market exports, which grew by an impressive 72% at 16,066 units.
The consideration will now be whether the new vehicle market can show any growth at all in 2024, depending on what December sales contribute to the annual volume,” added Gaoaketse.
“But relative to the headwinds that have faced the economy and market this year, volumes hovering towards the mid-40,000 sales mark continue to provide opportunity to consumers, dealers, and the brands themselves,” he said.
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