A glimmer of hope for new vehicle sales

Brandon Cohen, Nada’s national chairperson, said the resilience of South African motor vehicle retailers finally yielded to the pressures of a depressed economic environment last month, resulting in a substantial decline in new vehicle sales across all market sectors in the month.

Despite the downturn, Cohen highlighted a glimmer of positivity in that year-to-date vehicle sales at 491 967 units after 11 months of the year were still 0.8% higher than the comparable period last year.

“The challenge now is whether December sales can sustain this slim annual growth,” he said.

South Africa’s total new vehicle market contracted by a notable 9.8% to 45 075 units in November 2023 from the 49 986 unit sales registered in the corresponding month in 2022, with every segment of the market experiencing sales setbacks.

Dealers accounted for 84.8% of total new vehicle sales, with the vehicle rental industry accounting for 9.5%, corporate fleets 2.6% and government sales 3.1%.

Cohen attributed the downturn to a confluence of global unrest, political uncertainty, increased load-shedding and logistical challenges at ports, roads and railways.

“These factors, coupled with rising household costs, have collectively dampened consumer and business confidence,” he said.

Cohen said new vehicle sales were disappointing last month despite attractive consumer offers and efforts to reduce stock levels before year-end.

“Even with increased interest in long-term leasing and step-payment financial programmes, these incentives failed to attract significant numbers of actual buyers,” he said.

However, Cohen was hopeful that the closure of the mining and manufacturing sectors over the festive season would alleviate electricity demand and brighten the outlook for new vehicle sales over the year-end holiday period.

WesBank Head of Marketing and Communication, Lebo Gaoaketse, said consumers had their third respite from further interest rate increases in November when the South African Reserve Bank held interest rates unchanged but warned that the general outlook remained for a high interest rate environment to continue impacting household debt until the middle of next year.

“While this is of some comfort to indebted consumers, the high lending rate, combined with high inflation and relatively lower household income, will continue to restrict big-ticket purchases, such as new vehicles,” he said.

Gaoaketse added that the volatility of the energy crisis also continued to weigh on consumer and business confidence.

“Those restricted household incomes and business revenue streams are prioritising an alternative energy solution before a new vehicle purchase.

“With the return of higher stages of load-shedding during November, sales during December and January could be expected to experience a higher-than-usual wait-and-see approach to purchase decisions,” he said.

Gaoaketse said the increase in used vehicle interest has also impacted new vehicle sales during the four consecutive months of year-on-year declines.

“This is driven by affordability of instalments in the monthly household budget and the uncertainty of the myriad of socio-political headwinds facing consumers,” he said.