As South Africa navigates a high-inflation environment, the automotive sector is cautiously optimistic about a potential rebound in new vehicle sales as the year draws to a close. The National Association of Automobile Manufacturers of South Africa (naamsa) recently reiterated its forecast for 2024, highlighting a challenging first half but anticipating improved conditions in the latter months.
Mikel Mabasa, CEO of naamsa, noted: “We predicted a year of two halves, with the first six months proving taxing and the second half offering brighter prospects. Unfortunately, many of the economic challenges we faced in 2023 have persisted into 2024, including elevated interest rates, inflationary pressures, a weakened Rand, soaring fuel prices, port delays and an affordability crisis among consumers.”
Despite some positive trends emerging in the third quarter, both new vehicle sales and imports remain below 2023 figures by 6% and 3% respectively.
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In September 2024, the new vehicle sales experienced a slight dip of 4,1%, totalling 44 081 units, a decrease of 1 889 from September 2023. Exports also took a significant hit, dropping by 38,1% compared to the same month last year.
Year-to-date figures indicate total new vehicle sales have reached 401 169 units, marking a 5,8% decline from the previous year, while exports have plummeted by 19,7%. The decline in exports has been attributed to diminishing demand for vehicles nearing the end of their production cycles and stricter environmental regulations in key markets.
Notably, the new passenger car market saw a modest increase, with sales rising by 2% but sales for light commercial vehicles faced a setback, falling by 17,1% compared to the previous year. The performance in the medium and heavy truck segments was mixed, with medium commercial vehicle sales inching up by 0,5%, while heavy trucks and buses saw an 18% decline.
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Positive economic indicators have begun to emerge, with the South African Reserve Bank implementing its first interest rate cut in four years, along with a stronger Rand and easing inflation below target. Lower fuel prices have further alleviated pressure on consumers, fostering a slight resurgence in confidence.
“Looking ahead, there is a growing sense of optimism as interest rates are expected to decrease further, which may invigorate economic activity,” says Mabasa. “However, immediate improvements in vehicle affordability may still be constrained.”
Commenting on the interest rate cut, Lebo Gaoaketse, Head of Marketing and Communication at WesBank, says: “Cumulatively these cuts will begin to impact indebted consumers over time and provide some level of relief in expensive debt. However, the immediate effects are practically small; but philosophically provide a stimulus to the market in sentiment.”
The quarter percentage saving on a typical vehicle finance agreement over 72 months is only R13,08 per R100 000. Also of relevance is the month had two fewer selling days than September last year.
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“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 the slow recovery continues,” says Gaoaketse. “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.”
Brandon Cohen, National Chairperson of the National Automobile Dealers Association (NADA), added: "Passenger car sales are a key indicator of consumer sentiment and the positive growth in this segment for the second consecutive month is encouraging.
“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.”
Colin Windell for Colin-on-Cars in association with
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