The tide is turning for one of South Africa’s most important employers

The South African new-vehicle market experienced its eighth consecutive month of growth, and there are signs this will continue. 

This is good news for one of South Africa’s most important employers, which experienced a notable slowdown in 2024. 

The Automotive Business Council, Naamsa, highlighted at the end of last year that total aggregate vehicle sales for the year declined by 3%, marking the lowest point since the Covid-19 pandemic.

The council pointed to poor economic growth, falling consumer confidence, and purchasing power as the main culprits. 

However, there are signs that the tide is turning for the industry, with double-digit growth recorded for May 2025 driven by domestic policy shifts and steady sales momentum.

Domestic new vehicle sales surged in May, with 45,308 units sold, a 22% increase from the 37,139 vehicles sold in May 2024. 

Passenger car sales, in particular, jumped 30% year-on-year to 31,741 units. Light commercial vehicles, including bakkies and mini-buses, also grew by nearly 6% to 10,938 units.

“After eight consecutive months of growth, May’s sales data puts to rest any lingering doubts about the industry’s resilience,” said the council. 

Dealer sales accounted for 88.4% of the total, with the rest spread across rental, corporate, and government purchases.

Naamsa added that the South African Reserve Bank’s (SARB) decision to cut the repo rate by 25 basis points in May was widely welcomed across the industry. 

It ended a prolonged cycle of monetary tightening and sent a strong signal of support for growth, affordability, and macroeconomic stability.

“The SARB’s latest decision to lower interest rates is timely and commendable. It directly supports consumer affordability and boosts production competitiveness when global uncertainty weighs heavily on our export markets,” said Naamsa CEO Mikel Mabasa.

The move is expected to stimulate consumer demand through more affordable credit and reduced borrowing costs, while also giving much-needed breathing room to manufacturers facing rising input costs and global competition. 

Good news for hundreds of thousands of jobs

The momentum extended to medium and heavy truck segments, with medium commercial vehicle sales increasing by 22.7% and heavy trucks and buses up by 6.7%. 

These figures suggest renewed activity in logistics, construction, and industrial sectors, which rely heavily on commercial transport.

This is good news for an industry widely considered one of South Africa’s largest and most important employers. 

According to the National Automobile Dealers’ Association (NADA), the automotive value chain stretches far beyond original equipment manufacturers (OEMs). 

It noted last year that South Africa’s 1,600+ dealerships and their associated ecosystems form the backbone of automotive retail and support an estimated 500,000 to 1 million people. 

These jobs span the associated ecosystems, including finance, logistics, fuel, repairs, and service centres. 

Additionally, these businesses contribute billions to GDP annually and are critical to sustaining the sector’s overall health.

From a manufacturing standpoint, lower interest rates are expected to reduce capital costs, allowing OEMs to invest in tooling, retooling, and model upgrades. 

This investment is vital for future-proofing the industry and positioning South Africa as a globally competitive production hub. 

With inflation expectations now anchored lower, Naamsa sees this as an opportunity to spur new capital expenditure.

Adding further potential tailwinds, Naamsa has expressed optimism about the ongoing discussions between National Treasury and the SARB on lowering the country’s official inflation target to 3.0% from its current 4.5% midpoint. 

“A structural decline in inflation expectations could support permanently lower interest rates,” Naamsa said. 

“This would be transformative for automotive consumers and would improve manufacturers’ cost competitiveness.”

However, not all developments have been positive. While domestic sales are booming, concerns are mounting over export performance. 

May 2025 saw vehicle export sales decline by 14.6% to 30,112 units, down from 35,277 units a year earlier. Though year-to-date exports are still slightly ahead, up 1.4%, the monthly dip is a red flag.

The drop was largely due to a temporary production halt by a major exporting OEM that paused operations for facility upgrades ahead of a new model rollout. 

Still, the decline underscores a deeper vulnerability. “The fragility of global demand in the face of rising protectionism is increasing,” Naamsa warned. 

“Maintaining export competitiveness will require policy alignment, market diversification, and value-chain resilience.” Geopolitical tensions, global trade fragmentation, and tariff risks make exports more unpredictable. 

In this context, the SARB’s interest rate cut serves as an economic stimulus and strategic support for an industry navigating uncertain terrain.