Vehicle sales take a hit in South Africa in 2024

The South African new-vehicle market experienced its third consecutive month of growth in December 2024, but this was still not enough to stop the slowdown in annual sales in the industry.

Aggregate industry sales reached 41,273 units, a 2.5% increase compared to December 2023.

However, despite this late surge, it was not enough to give the industry the boost that it needed.

Total aggregate vehicle sales for the year declined by 3% to 515,712 units, marking the lowest point since the COVID-19 pandemic.

Automotive Business Council Naamsa said that this downturn reflects the broader economic challenges faced by the country in 2024.

Passenger car sales offered a glimmer of hope, recording a 1.1% increase for the year, while all commercial vehicle segments experienced declines.

The December growth was primarily fueled by an 8.2% rise in passenger car sales, with the rental industry playing a significant role.

According to Naamsa, several factors contributed to the overall decline in new vehicle sales in 2024:

• Economic slowdown:

The South African economy faced a challenging year, impacting consumer confidence and purchasing power.

Naamsa said that the industry anticipated a year of two halves with a taxing first half of the year and with brighter economic prospects and an upswing in new vehicle sales during the second half of the year.

This did not materialise as new vehicle sales remained under pressure in 2024.

Naamsa continued to reflect a shift in the matrix with various “new entrants in the domestic market, in particular Chinese brands, offering options at the more affordable end of the pricing spectrum as consumers battled a tough economic climate.”

• Market disruptions:

Naamsa emphasises a significant market disruption in the South African automative industry, putting new vehicle sales under pressure.

• Plummeting Exports:

Vehicle exports declined significantly in 2024, dropping by 22.8% to 308,830 units.

This decline was attributed to factors like a slowdown in demand in the European Union, stricter emission rules, competition from cheaper Chinese electric vehicle imports, and timing effects of new model introductions in the domestic market.

Hope remains

December 2024 saw a positive trend, with three consecutive months of year-on-year sales increases.

This growth can be attributed to:

• Strong Seasonal sales: The December period typically sees a surge in vehicle sales, particularly to the rental industry.
• Easing inflation and interest rate cuts: Two interest rate cuts towards the end of 2024, coupled with easing inflation, created a more favourable economic environment, boosting consumer confidence and disposable income.

Challenges and opportunities for 2025

While the December sales figures provide a positive note, the industry faces several challenges and opportunities in 2025:

• Local and global uncertainties: Factors like local wage negotiations, US policy shifts, oil price volatility, and geopolitical tensions may impact the market.
• Affordability concerns: Consumers’ growing price sensitivity is shifting demand toward smaller, affordable cars or quality used vehicles, pressuring retailer profits.
• Growth in Hybrid Vehicles: Rising petrol prices and increasing interest in sustainability are driving the growth of hybrid vehicles.
• Competition from Chinese Brands: The continued rise of affordable Chinese vehicles will push established manufacturers to adjust pricing strategies.

Despite the challenges, Naamsa said that there are reasons for cautious optimism in 2025.

Positive economic indicators and the resilience of the passenger car segment suggest a potential rebound.

Factors like further interest rate cuts, easing energy constraints, and ongoing reforms in key sectors like electricity and transport could contribute to improved economic growth, projected at around 1.5% for 2025.

This growth could translate into a single-digit improvement in the new vehicle market compared to 2024 levels.

However, Naamsa said that the industry’s success in 2025 will depend on its ability to navigate these challenges and capitalise on emerging opportunities.

Adapting to evolving consumer preferences, particularly the focus on affordability and sustainable solutions, will be key for sustained growth.

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