Not unexpectedly new vehicle sales in South Africa declined by a whopping 29,6% to 32 396 units compared to the July last year but, did improve slightly on the June figures.
However, with Covid-19 lockdown restrictions still in place, industry experts are suggesting these numbers may be a guide to ‘the new normal’ rather than an actual trend.
According to the National Association of Automobile Manufacturers of South Africa (Naamsa), new vehicle sales declined 29,6% to 32 396 units compared to July last year. This shows some levels of improvement in the context of June sales, which were 30,7% down year-on-year for a market volume of 31 867 units.
“We had begun to see uptake on fixed rate deals last month thanks to the low interest rates and it is interesting to note the significant change in the bank’s average deal duration in July,” says Lebogang Gaoaketse, Head of Marketing and Communication at WesBank.
WesBank data indicates a shift towards earlier settlements of deals in July.
“We might have considered this as a result of consumers making affordability decisions in terms of monthly instalments, except the bank’s average deal size is between 10% and 15% higher year-on-year across new and used,” says Gaoaketse. “We will require more data before we can fully understand how buyer behaviour is changing.”
Indebted consumers benefited from another cut in interest rates during July as the Reserve Bank attempts to stimulate the economy and balance some level of relief against investment returns. But households were also faced with rising fuel prices of 7,5% despite the price being 20,9% lower than a year ago. Consumer Price Inflation came in at 2,2% although the overall food basket increased 4,2% and many food groups in the car-buying market exceeded this amount.
“This all continues to paint a picture of a hard-hit economy that will take some time to recover,” says Gaoaketse.
Passenger car sales fared slightly worse than last month, down 35,8% to 18 905 units compared to July last year. June sales had recorded a 33,4% year-on-year decline with 19 264 units sold last month.
Light Commercial Vehicle (LCV) sales, however, showed a dramatic improvement over June, which was down 29,7%. July sales in the segment came in 19,7% down on July last year to 11 123 sales. This was 934 more units than sold in June.
“It must be noted not all segments of the market are contributing to sales as the market slowly re-opens,” says Gaoaketse. “The rental market is effectively dormant until such time as business travel and tourism return to some level of significant operation. Government sales, however, are only slightly lower (6,9%) year-on-year.”
Although WesBank retains a cautious approach for the remainder of the year, there is some reason for optimism: with these experienced levels of market activity amidst the peak of the country’s COVID-19 infection rate, more market confidence could be expected as the country begins to slow the onslaught of the pandemic.
According to the National Automobile Dealers’ Association’s (NADA’s) chairperson, Mark Dommisse: “Most worrying to note is July was a very long trading month and vehicle sales were still almost 30% down on the previous year.
“July was a very difficult trading month and we do not see a quick recovery from this new reality any time soon. In fact, we’re looking at a minimum of one to two years before we see any significant improvement in new vehicle sales.
“Consumers are still under massive pressure to meet their monthly household expenses, and cautious when making big-ticket vehicle purchases and committing to large financial payments,” says Dommisse. “While there is some reprieve from recent interest rate cuts, rising fuel prices and general inflation will continue to pinch wallets into the foreseeable future.
“On the positive side, many consumers will have resumed paying deferred instalments in July, and considering the pressure they are under and that there is still an appetite for new cars in the current environment, a flat month from June to July was very encouraging,” adds Dommisse.