Considering Moody’s has just walloped South Africa with another downward ratings adjustment, a smidgen of good news comes in the form of a slight increase in vehicle sales for October – with fleet business picking up on the car side and some signs of confidence on the commercial side.

The National Association of Automobile Manufacturers of South Africa (NAAMSA) confirmed aggregate domestic new vehicle sales, at 51 978 units, reflected a marginal increase of 122 units or 0,2% from the 51 856 vehicles sold in October last year. Monthly export sales had registered a further solid performance in line with industry expectations.

Overall, out of the total reported industry sales of 51 978 vehicles, an estimated 38 558 units or 74,2% represented dealer sales, an estimated 20,3% represented sales to the vehicle rental industry, 3,7% to industry corporate fleets and 1,8% to government.

The October 2019 new passenger car market increased by 860 cars or 2,5% to 35 904 units compared to the 35 044 new cars sold in October last year. The car rental industry continued to support domestic volumes, accounting for a significant 28,2% of new cars sales in October 2019.

Domestic sales of new light commercial vehicles, bakkies and mini-buses at 13 366 units during October 2019 had recorded a decline of 833 units or a fall of 5,9% from the 14 199 light commercial vehicles sold during the corresponding month last year.

Sales in the medium and heavy truck segments of the industry reflected an improved performance and at 839 units and 1 869 units, respectively, reflected an increase of 63 vehicles or a gain of 8,1%, in the case of medium commercial vehicles, and, in the case of heavy trucks and buses, an improvement of 32 units, or an increase of 1,7% compared to the corresponding month last year.

The October 2019 export sales number at 41 277 vehicles reflected a strong increase of 7 152 units, or 21,0%, compared to the 34 125 vehicles exported in the same month last year. For the first ten months of the year, vehicle exports, at 338 955 units, are now at their third highest level on record with still two months to go for the year and well on track to achieve another record in 2019.

Although some positive signs during October 2019, the turnaround in the new vehicle market, anticipated for the second half of the year, has not realised yet. Furthermore, the low growth environment and the rise in South Africa’s fiscal risks do not bode well for the foreseeable future.

Prospects for domestic new vehicle sales would continue to be affected by the depressed current macro-economic environment, enduring pressure on household disposable income as well as low business and consumer confidence. Demand for domestic new vehicles, particularly the new passenger car market, therefore, would continue to remain under pressure over the medium term.

Of significance, however, is the continued strong performance on the export side. After only 10 months the third highest vehicle export level on record has been achieved and the industry is now squarely set to achieve a new record in 2019.

While the South African economy fails to meet its Gross Domestic Product forecast this year, new vehicle sales look equally unlikely to reach the softer levels of slowdown expected by WesBank in January.

However, while the country reeled to the sober mid-term budget speech this week, new vehicle sales managed to build on September’s stability and provide some level of optimism to the motor industry.

“October has also been the best-selling month every year since 2015, so the increase – however small – comes off a high base,” says Lebogang Gaoaketse, Communications, Social Media and PR Manager.

“The motor industry remains a key economic indicator, not only for manufacturing in terms of investment and jobs, but also in interpreting consumer and business confidence from behaviour on the showroom floor,” says Gaoaketse. “With year-to-date sales down 3,1% at the end of October, there is clear correlation between how we expected new vehicle sales to develop this year and where GDP has netted out.”

Finance Minister, Tito Mboweni announced on Wednesday a revised GDP outlook for 2019 at 0,5% growth against his February budget forecast of 1,5%. WesBank expected new vehicles sales to decline 1% this year.

“Very simply, the economy remains tight,” says Gaoaketse. “Motorists look likely to also have to face the news that e-Tolls are here to stay and while the currency battles and the possibility of ratings downgrades surface once again, household budgets will remain under pressure.”

In support of this plight, inflation news rises as one of the few shining lights of hope for consumers.

“Inflation fell to its lowest level in almost eight years, while staying within the central bank’s target range for two-and-a-half years now,” says Gaoaketse. “Despite this, the impact of costs set by the state – like power, water and fuel – along with factors such as bailouts and lower-than-expected tax revenue, leaves little hope for further interest rate cuts right now.”

“The industry will certainly be breathing easier, but should not be holding their breath for relief for the rest of the year,” concluded Gaoaketse.