Supply problems with some Light Commercial Vehicle brands held back any gains in total vehicle sales for October with the market shrinking 25,4% compared to the same month last year.
“New vehicle sales in South Africa are slowly picking up but not at 2019 levels yet. We are not out of the woods yet. While vehicle exports are making a steady comeback, we remain cautiously anxious about the reports of a COVID-19 second wave across Europe which could further depress our overall outlook for the balance of this year,” says Mikel Mabasa, National Association of Automobile Manufacturers of SA (NAAMSA) CEO.
Reflecting on the new vehicle sales statistics for the month of October 2020, NAAMSA confirmed the downward trajectory in new vehicle market continued during the month, albeit at a slower pace with aggregate domestic sales at 38 752 units reflecting a decline of 13 216 units, or 25,4% from the 51 968 vehicles sold in October last year.
Export sales at 33 474 units also declined by 7 792 units or 18,9% compared to the 41 266 vehicles exported in October 2019.
Overall, out of the total reported industry sales of 38 752 vehicles, an estimated 32 478 units or 83,8% represented dealer sales, an estimated 9,4% represented sales to the vehicle rental industry, 3,8% sales to government, and 3,0% to industry corporate fleets.
The October 2020 new passenger car market at 26 793 units had registered a decline of 9 106 cars or a fall of 25,4% compared to the 35 899 new cars sold in October last year. The car rental industry accounted for an encouraging 12,8% of car sales in October 2020.
Domestic sales of new light commercial vehicles, bakkies and mini-buses at 9 644 units during October had recorded a decline of 3 717 units or a fall of 27,8% from the 13 361 light commercial vehicles sold during the corresponding month last year.
Major supply issues across significant Light Commercial Vehicle (LCV) brands due to Covid-19 restrictions, coupled to the run out of certain key models, resulted in a 22,6% reduction in light commercial vehicle volume on dealer floors.
“Demand seems to be outstripping certain supply lines on LCVs and, while this is not an ideal situation, it could be worse if things were the other way around,” says Mark Dommisse, Chairperson of the National Automobile Dealers’ Association (NADA).
Sales for medium and heavy truck segments of the industry reflected a weak performance and at 662 units and 1 653 units, respectively, showed a decline of 178 vehicles or a fall of 21,2% in the case of medium commercial vehicles, and, in the case of heavy trucks and buses a decline of 215 vehicles or a fall of 11,5% compared to the corresponding month last year.
The October 2020 the exports sales number at 33 474 units represented a decline of 7 792 vehicles or 18,9% compared to the 41 266 vehicles exported in 2019. The performance for the year to date now reflected a fall of 119 803 vehicles, or 35,3% compared to the level of the same period last year.
“Combined with low interest rates, banks’ lending appetites have supported this market growth. What is intriguing, however, is that levels of sales and levels of demand experienced at WesBank seemingly don’t correlate,” says Lebogang Gaoaketse, Head of Marketing and Communication at WesBank Vehicle and Asset Finance. “Market activity as measured by finance applications indicate a demand for vehicle finance at levels only marginally lower than October last year.”
This demand is also not unduly different year-on-year in terms of demand for finance for either new or used vehicles.
Although market volume increased by 1,516 units over September, sales were relatively worse off in October year-on-year. September sales were down 23,9% by comparison. Segment performance faired more evenly, however.
Activity in the new vehicle market is gradually improving every month but sales remain very slow to recover to previous levels. The country’s economy remains fragile and while the economy would slowly regain momentum, tough months were still ahead before business and consumer confidence was rebuilt.
The year to date sales figures tells a dismal story now reflecting a decline of 146 261 units, or 32,5% compared to the corresponding period last year.
Going forward, interest rates at an all-time low could assist some businesses and consumers from an affordability point of view. However, the sentiment expressed by the NAAMSA CEOs relating to automotive business conditions over the next six months by and large remains pessimistic.
“We expect interest rates to remain low for quite some time as Government continues to make every attempt to stimulate the economy,” says Gaoaketse. “This continues to provide a good opportunity to purchase a vehicle at some of the most affordable lending rates.”
However, WesBank warned that demand in the new vehicle market may be waning off the back of COVID-19 as consumers simply have less need for mobility, never mind the affordability implications.
“With fuel sales down between 20% and 25% and public transport demand around 30% lower, consumers are simply moving around less,” he says.
He added the mobility element of household budgets may be shifting more towards property investment as the housing market picks up, thanks to low interest rates and the rising need to work from home.