Despite vehicle sales in South Africa continuing their downward trend in September, a small increase in passenger car sales has offered a glimmer of hope that the market may be turning. In particular, it seems that consumers are getting back their appetite for new passenger cars – even if it is only an itch at this stage.
According to naamsa, the Automotive Business Council, total vehicle sales of 44,081 units were down 4.1% from the same period last year – a decline of 1,889 units, compared to the 45,970 vehicles sold in September 2023.
A modest 2% increase in passenger car sales amounted to 30,218 cars sold for the month, compared to 29,626 new passenger cars sold in September 2023.
Two segments were hammered: heavy trucks and buses saw a decrease of 314 units or 18% compared to the 1,849 units sold in the same month last year; light commercial vehicles, bakkies, and mini-buses saw a decrease of 2,257 units, or a loss of 17,1%, from 13,171 units sold in September 2023 to10 914 units in September 2024.
Export sales also took a beating – not surprising considering the fiasco of South Africa’s disastrous ports and rail management in recent times.
Export sales fell by a massive 38.1% 13,535 units, to 21,964 units in September 2024, from 35,499 exported in September last year.
The industry is clinging onto the passenger car sales as a glimmer of hope.
“Passenger car sales are a key indicator of consumer sentiment, and the positive growth in this segment for the second consecutive month is encouraging,” said Brandon Cohen, national chairperson of the National Automobile Dealers Association (NADA).
“While the Reserve Bank’s first interest rate cut in four years will take time to fully impact the market, we are already seeing other positive factors, including a stronger exchange rate, lower inflation, a positive 100-day performance by the Government of National Unity, increased foreign investment, 190 days without load shedding, and lower fuel prices. These are all promising signs.”
His sentiments echoed those of naamsa, which said in a statement that South Africa’s automotive industry remained optimistic that the tide for higher new vehicle sales would turn towards year-end.
Mikel Mabasa, naamsa CEO, said that naamsa had forecast at the beginning of 2024 that the organisation anticipated a year of two halves, “with a taxing first six months of the year and improved prospects for the second half of the year”.
“All the economic challenges of 2023 rolled over into 2024, such as the high interest rate and inflation environment, a weaker Rand exchange rate, high fuel prices, port delays, and indebted consumers, along with a vehicle affordability crisis,” he said.
“Our predictions and overall outlook for this year played out exactly as we suspected for the first half of the year. We have seen some positive movements during the third quarter but both new vehicle sales and vehicle imports for the first nine months of the year were still 6% and 3%, respectively, below the 2023 levels.”
He pointed out that South Africa was celebrating Transport Month in October as the country reaches the first 100 days of the Government of National Unity (GNU).
“The GNU has sparked positive sentiment both within the country and internationally, with its focus on infrastructure development and its commitment to revitalising key sectors, including transport and the automotive industry.”
In releasing the latest data, naamsa highlighted numerous positive developments.
“Economic indicators in September 2024 showed positive trends, including the first interest rate cut in four years by the South African Reserve Bank, a stronger Rand, and easing inflation below the mid-point of the central bank’s target range. Lower fuel prices further bolstered consumer confidence, offering relief to household budgets.
“As the country anticipates further interest rate reductions, the costs of borrowing are expected to decline, which may stimulate economic activity, even though immediate improvements in vehicle affordability may be limited. Since the decline in new vehicle sales began in August 2023, expectations are rising that the new vehicle market could see improvement for the remainder of the year due to favourable economic conditions and the comparison to last year’s lower base levels.”
Cohen said that NADA was cautiously optimistic: “Despite these green shoots, the economic environment remains challenging, with rising electricity prices expected to put further pressure on disposable income. However, the industry remains cautiously optimistic about potential improvements in the fourth quarter, driven by the introduction of new models, additional brands in the lower price segments, and aggressive dealer incentives.
“We are not out of the woods yet, but the data is showing positive signs in the domestic market, and sentiment continues to improve. This momentum will hopefully translate into stronger sales in the medium to long term.”
Lebo Gaoaketse, head of marketing and communication at WesBank, also struck a cautious tone, in particular around expectations created by the 0.25% interest rate cut.
“The immediate effects are practically small, but philosophically provide a stimulus to the market in sentiment,” he said.
The quarter percentage saving on a typical vehicle finance agreement over 72 months is only R13,08 per R100,000.
“This translated into the relatively poor performance of the new vehicle market in September.”
However, he agreed that sentiment was positive.
“The September market performed at similar volumes to those experienced in the beginning of the year and where the market was towards the end of 2019, showing that the slow recovery continues. With the expectation of stimulated trading conditions over the next 18 months, the new vehicle market can be expected to perform better as consumers slowly reap the rewards of debt savings.
“Sentiment is shifting more positively, which will provide good impetus for the country’s new vehicle market. Volumes remain robust and demand remains high, all positive conditions for improving market performance.”
* Arthur Goldstuck is CEO of World Wide Worx and editor-in-chief of Gadget.co.za. Follow him on social media on @art2gee.