Domestic sales fall

Overall vehicle sales crashed in May after a bit of a lift in April, while exports also took a tumble for the first time this year according the latest figures released by The National Association of Automobile Manufacturers of South Africa (NAAMSA).

Aggregate domestic sales at 40 506 units showed a decline of 2 444 units or 5,7% from the
42 950 vehicles sold in May last year. Export sales registered a decline of 2 866 vehicles or a fall of 8,8% compared to the 32 829 vehicles exported in May last year.

Overall, out of the total reported industry sales of 40 506 vehicles, an estimated 35 506 units or 87,7% represented dealer sales, an estimated 5,8% represented sales to the vehicle rental Industry, 3,6% to industry corporate fleets and 2,9% to government.

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The May 2019 new passenger car market showed a decline of 378 cars or a fall of 1,4% to 26 170 units while new light commercial vehicles, bakkies and mini buses at 12 197 units during May 2019 recorded a decline of 1 816 units or a fall of 13,0% from the 14 013 light commercial vehicles sold during the corresponding month last year.

Sales in the medium and heavy truck segments of the Industry had a mixed performance and at 681 units and 1 458 units respectively, reflecting a marginal increase of 2 vehicles or an improvement of 0,3%, in the case of medium commercial vehicles and, in the case of heavy trucks and buses, a decline of 252 vehicles or a fall of 14,7% compared to the corresponding month last year.

The May 2019 export sales number represented an unexpected decline with export sales at 29 850 vehicles reflecting a decrease of 8,8% compared to the 32 716 vehicles exported in the same month last year. The momentum of vehicle exports over the course of 2019 should, however, increase further with vehicle exports for the first five months of the year still 20,1% higher than the corresponding period last year.

Demand for new vehicles is likely to remain under pressure in the coming months as the market continues to be affected by numerous constraining factors. The ABSA Purchasing Manager’s Index decreased from 47,2 points in April 2019 to 45,4 points in May 2019 which does not bode well for a recovery in activity in the manufacturing sector.

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Subdued economic circumstances in coming months, low consumer and business confidence levels, household disposable income which remains under pressure and global economic growth forecasts which continues to signal moderation pose worrying trends for the broader manufacturing sector.

However, in anticipation of an improved economic growth rate for the year compared to 2018, albeit modest, a better second half performance in terms of new vehicle sales is still expected while the upward momentum on the export side remains strong and industry vehicle production levels would continue to benefit from strong vehicle export sales.

“We had warned against hopes of a major turn-around last month,” says Ghana Msibi, WesBank Executive Head of Motor. “April sales had represented a marginal 0,7% increase in sales within a traditionally short sales month.

“May sales return to a picture more representative of the rest of the year.

“Dealers continued their swings-and-roundabouts experience, scoring on passenger cars and losing on LCVs,” says Msibi.

Demand for passenger cars through the retail network translated into a 2,6% increase in sales through this channel. But consumers were less-interested in LCVs, dealer channel sales losing 15,1% in this segment. Rental market performance was also low on demand during May.

“Household incomes remain under pressure,” says Msibi. “Consider that fuel price inflation year-on-year is 9,2%, while WesBank’s average deal size for new vehicles has increased more in line with official inflation at 4,8%. The difference in fuel price since January this year is as much as R2,69 for every litre of 93 unleaded, which gives a very real sense of how much further salaries have to go.”

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Consumers will be looking to the new government for reassurance, as will the South African motor industry be hungry for more stability.

“While government has already taken major strides in policy reform, the new cabinet has the responsibility to instill more stability in the motor industry and provide consumers renewed confidence to support their mobility,” says Msibi.

“Government needs to provide clarity on critical paths to improvement in the stability of State-Owned Enterprises, the mining charter, and land expropriation. This will contribute to a more stable interest rate cycle and boost the motor industry’s significant contributions to the manufacturing sector and GDP. This will provide renewed certainty for corporate South Africa and provide consumers the wherewithal to make confident purchase decisions.”

These macro-economic influences will go far to realising improved second-half sales, which is required if the industry is going to claw back to an annual market down 1%.

“Despite a disruptive first two weeks due to the elections, the passenger car market held its own on dealer floors with a 2,6% increase year on year. This was mainly due to the uptick of sales in the more affordable price category of passenger cars. The light commercial vehicle market was severely under pressure with significant volume reductions seen this month of -15,1% compared with May 2018,” says Mark Dommisse, Chairperson of the National Automobile Dealer’s Association

“The economic uncertainty until the announcement of election results mid-May affected the market, which is clearly evident across the full commercial vehicle sector,” continues Dommisse.

“With the election behind us and government’s focus on stabilising the economy, we should see more stability in the new vehicle market in the second half of the year.”

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