New vehicle sales last month suffered their biggest drop in more than a year as a subdued economy took its toll. But exports of locally made vehicles continued to rise. Total domestic car sales declined 4.8% year on year to 50‚251 units‚ the National Association of Automobile Manufacturers of SA (Naamsa) said. The slowdown was more than anticipated by analysts.
Not only was this the biggest monthly decline since May last year‚ it was also the most that new car sales have fallen since January this year. Naamsa said there had been a steady decline in new vehicle sales and this was expected to be the norm in the medium term. “Subdued levels of economic activity‚ electricity supply constraints‚ the impact of the recent higher personal tax burden‚ substantial increases in petrol price inflation and above-inflation new vehicle price increases all contributed to an unfavourable outlook for domestic new vehicle sales‚” it said.
Simphiwe Nghona‚ head of WesBank’s executive motor division‚ said buying a new car would now cost a consumer about 4.9% more than it would have a year ago. Vehicle inflation is mainly driven by the weaker rand‚ which does not bode well for local manufacturers given that about 75% of the cars sold in SA are imported. The weak rand has also been a major driver behind the increases in the petrol price this year. Since January the petrol price has gone up 23%. Mr Nghona said WesBank’s approval ratio for new car finance applications had declined last month due‚ in part‚ to more stringent affordability assessments introduced by the National Credit Act this year‚ which had forced banks to take extra care in ensuring consumers could afford loans.
Nedbank Capital said the outlook for domestic car sales this year remained unfavourable. “Passenger vehicle growth will be constrained by low consumer confidence‚ bleak job prospects‚ tighter credit market conditions and elevated household debt‚” the bank said. The South African Reserve Bank’s monetary policy committee meets later this month and expectations are that rates will be hiked‚ adding to consumer woes. In contrast‚ vehicle exports remained resilient‚ increasing more than 33% to 31‚422 units. This was‚ however‚ slower than the 114% surge in exports in May‚ which was led by luxury car marker Mercedes-Benz.
Naamsa said vehicle exports remained on target to reach the year’s target of 330‚000. To date about 168‚940 vehicles have been exported.