NADA pins its hopes on interest rates for future sales growth

Brandon Cohen, the chairperson of NADA, adds that as expected, the general election and the accompanying uncertainty about South Africa’s future severely impacted vehicle sales last month.

Cohen is commenting on the 14.2% slump in total new vehicle sales in May 2024 after the 2.2% positive growth in total new vehicle sales in April 2024 after eight consecutive months of year-on-year decline.

He says new vehicle buyers were very jittery in the run-up to the election, leading to subdued activity, although there was a noticeable uptick in deliveries on May 30 and 31.

Sales by retail motor dealers accounted for 89.4% of sales, with the rental industry’s offtake of 4.5% of total sales well below the norm while industry corporate fleets accounted for 3.1% of total sales and sales to government 3%.

All market segments experienced a year-on-year decline in sales in May 2024, with passenger car sales down 11.7%, light commercial vehicles 19.5% lower and medium commercial vehicle sales decreasing by 7.3%, while heavy truck and bus sales declined by 17.1%.

“Consumers remain under significant financial strain and although repo rates have been held steady for some time, current interest rate levels remain too high for many potential vehicle buyers.

“We were pleased to see the country’s inflation rate drop from 5.3% to 5.2% last month but it is still well above the South African Reserve Bank’s (SARB) target of 7.5% % to justify a cut in interest rates,” he says.

Cohen adds that the outcome of the 2024 election will undoubtedly reshape South Africa’s young democracy and the next two weeks will set the country on a new trajectory, regardless of whether there is a coalition, a government of national unity or a minority government.

He says NADA called on South Africa’s elected leaders to prioritise the needs of the people above their own, act with maturity and ensure stability, safety and security for all South Africans.

“That says the outcome of coalition talks will materially affect our currency and other inflationary drivers, so we need to monitor this closely.

“The news that the European Central Bank may soon cut lending rates is welcome, but there is a long road ahead for global economies to return to pre-COVID levels.

“On a pragmatic note, there are some positives: load-shedding has been held off for two months, the elections themselves were peaceful and numerous deals are available in the market to attract buyers.

“Additionally, the government announced a significant over-recovery in fuel pricing, so we can expect petrol prices to decrease this month by about R1 a litre and diesel to drop by R1 a litre for 500 ppm and 90c for 50 ppm if initial numbers hold.

“This will provide welcome relief at the pumps and help reduce inflationary pressure,” he says.