South African new vehicle sales recorded their best post-lockdown performance in November, providing positive signs of a slow rehabilitation of the country’s motor industry – also evidenced by a raft of activity with live launches from a number of automakers including Hyundai, Kia, BMW and Volkswagen.
Amidst an overall market, down 30,6% year-to-date, November’s sales performance of 39 315 units shows signs of resurgent consumer demand and relief for motor retailers as volumes continue to increase. In essence, November sales doubled-up the performance increase over October (down 25,4%) to close 12% down on November last year.
According to sales data from the National Association of Automobile Manufacturers of South Africa (Naamsa), vehicle sales continued to increase for the fifth consecutive month, although the volume growth was only 563 units. The increase in market performance was mirrored by the ongoing growth in consumer demand, as measured by applications at WesBank.
“Generally, we have recovered to about 70% of pre COVID-19 volumes,” says Lebogang Gaoaketse, Head of Marketing and Communication at WesBank Vehicle and Asset Finance. “While it would be unrealistic to expect the market to return to 100% in the short to medium-term, the industry has adapted quickly to the new levels of demand to remain sustainable and continue contributing towards economic recovery.”
WesBank CEO, Chris de Kock says new blended working arrangements have reduced the demand for consumers to own cars.
“For those who do, it is likely that their annual mileage will reduce considerably, increasing the time between replacement cycles. The South African economy will simply not be able to support a market of 500 000 vehicles a year,” says De Kock.
Passenger car sales were 18,1% lower than November 2019, recording 25 707 unit sales. This is 5 696 units less than November last year and 989 units less than last month, potentially indicating shifts in the market in terms of demand. Dealers will have been relieved to only see a 5,9% decline in consumer demand in the sector as consumers continue to show renewed appetite for vehicle purchases.
Bigger news was the 5,3% growth in Light Commercial Vehicle (LCV) sales to 11 243 units. This is a significant 1 590 more units than October and is the first positive growth sales number since lockdown began. Consumer demand at dealer level was slightly softer, but still 2,8% up on November last year.
De Kock says the shift in market demand is the result of two significant trends, both centred around affordability.
“Consumers are clearly seeking to reduce their monthly instalment by buying a more affordable vehicle,” says De Kock. “The evidence of this can be seen in the market growth of the new car segment offering lower priced vehicles where customers seem willing to substitute high profile brands for more practical and affordable options.”
Also contributing to this trend is in the increase in new vehicle prices, now averaging close to double digit inflation this year.
“The other trend is the shift towards the used car market, again driven mostly by the buydown effect,” says De Kock.
Year-to-date sales reached 343 276 units at the end of November, down 30,6% on the same period last year.
“The low interest rate environment is expected to stay for quite some time, allowing consumers an ideal opportunity to combat affordability and many are taking the opportunity to fix their rates in their finance agreements,” says Gaoaketse.
“A vehicle remains a big-ticket purchase consideration for any household budget and is consequently a key indication of confidence in the market. November sales show a more positive picture of that confidence slowly returning.”
South Africa’s hard-pressed motor dealers are feeling cautiously optimistic about the future, following the release of the November new vehicle retail sales figures.
“Even though the retail sales figures remained muted in November, which once again reminded us of the challenges facing the overall automotive industry in these times, the general feeling of dealers is they are slightly more hopeful than they were a few months ago,” commented Mark Dommisse, the Chairperson of the National Automobile Dealers’ Association (NADA).
Dommisse continued by saying: “The monthly sales decline across the entire new car market has remained steady since halfway through 2020.
“What we need to know now, is what direction the government is going to take to handle the growing number of coronavirus infections while still preserving a recovering economy.
The NADA Chairperson went on to say the pricing of pre-owned vehicles is currently holding up well, but there is a concern about a decrease in the supply of used vehicles. He added he believed this shortfall will continue into 2021 and is problematic for the industry.
“Fortunately, interest rates are remaining low, and we still have the rand holding up against the dollar as well as a stable oil price. The looming wage dispute between the government and the trade unions could affect the economy.
With economic uncertainty, customers are wary of spending on big ticket, durable items. Instead they are tending to hold onto savings and disposable income for the time being
“Another problematical area is the backlog in renewing vehicle and driver’s licences as well as the threat of the rigorous AARTO regulations taking effect without amendment, which will have far-reaching negative outcomes for the motor industry.
“The good news is that the industry has started on its long road to recovery with fairly consistent sales results over the past five months. This is bringing a measure of stability to the market. We also know that the pandemic has altered the way many people travel and anticipate ongoing changes in the commute between home and work into the future. This will impact on the type of vehicles they buy or whether a significant number will switch to shared transport options,” concluded Dommisse.