Big hopes for South Africa’s car industry
New vehicle sales in South Africa managed to show some growth in 2023, with expectations positive for 2024.
Brandon Cohen, Chairperson of the National Automobile Dealers’ Association (NADA), said that growth in the new vehicle market seemed unlikely given the declining performance of the industry in the second half of 2023.
According to data from Naamsa, December marked the fifth consecutive month of year-on-year decline, with aggregate industry new vehicle sales dropping by 40,329 units – a decline of 1,392 vehicles (-3.3%) compared to the 41,721 units during December 2022.
The new passenger car (-3.9%) and light commercial vehicle (-2.9%) markets reflected a weak market performance. The sales of medium commercial vehicles also dropped year-on-year by 24.2%.
However, looking more positively, the sales of heavy commercial vehicles and buses increased by 13.9%, while export sales jumped by 1.2%.
Looking at the whole of 2023, new vehicle sales increased by 0.5% from 529,556 in 2022 to 532,098 units sold in 2023.
Although it was an improvement, it was not at the scale of the hoped-for pre-pandemic levels, with Naamsa noting that it will likely take four years to recover to the pre-pandemic level of 536,612 units in 2019.
Despite the strong start to the year amidst a depressed economy, the elevated cost of living increases and power outages, Naamsa said that the major logistical challenges at the country’s ports proved too much for the new vehicle market to make a full recovery.
“Overall, last year, dealers had to cope with tough market conditions that were, arguably, the toughest since 2007 or even 1998 in terms of economic pressure on consumers,” Cohen said.
“This led to some overstocking, placing importers, distributors, and manufacturers under significant pressure to facilitate stock movement. Consequently, efforts were made to enhance market activity through year-end incentives, ensuring sustained sales momentum.”
Looking more positively, exports hit a new record of 396,290 units – a 12.7% improvement from 2022. This is good news for local manufacturers as two out of every three vehicles manufactured in South Africa are exported, which should help ensure higher employment levels in the sector.
Outlook
Looking ahead to this year, Naamsa said that the pause in interest rates in the second half of 2023 and the easing of inflation should give some respite on household finances.
Lower interest rates, faster economic growth and moderate inflation could also support the new vehicle market this year.
“As far as the inevitable transition to NEVs is concerned, the long-awaited NEV White Paper was unveiled by the DTIC in December 2023 and signals the government’s commitment to the widespread adoption of electric vehicles and other eco-friendly modes of transport,” Naamsa said.
“The policy supports investments in the development and expansion of new and existing manufacturing plants to support the production of electric vehicles in the country.”
“Part of the broader strategy includes collaborating with other African countries to develop battery production capacity on the continent, by pooling the critical-mineral resource base that Africa was endowed with.”
The global economy is also expected to remain weak this year, but inflation will likely ease, supporting calls for rate cuts and boosting South Africa’s vehicle exports.
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