The CEOs of car producers in South Africa have warned of a negative, cautious and uncertain outlook for all of the industry’s key performance indicators over the next six months due to economic headwinds.
This comes as the new vehicle market continued its declining trend as the financial strain on consumers, due to high interest rates and a sluggish economy, impacted negatively on new vehicle demand.
However, the upward momentum in vehicle exports supported vehicle production in the case of some light vehicle original equipment manufacturers (OEMs).
The Automotive Business Council (Naamsa) yesterday said aggregate new vehicle sales declined by 5.4% during the fourth quarter 2023 compared to the corresponding quarter 2022, and fell by 3.5% compared to the third quarter 2023.
Aggregate industry new passenger car sales at 86 709 units recorded a decline of 6 440 units in the fourth quarter, or a fall of 6.9% compared to the 93 149 new passenger cars sold during the corresponding quarter of 2022.
Aggregate industry commercial vehicle sales during the fourth quarter of 2023, at 43 931 units, recorded a decline of 972 units, or a loss of 2.2% compared to the 44 903 units sold during the fourth quarter of 2022.
Naamsa said this was due to a depressed economy, elevated cost of living increases as well as lower seasonal sales to the car rental industry, while new vehicle sales also yielded to the pressure of the major logistical challenges at the country’s ports during the quarter.
It said the supply chain disruptions caused by the port challenges on vehicle production and sales during the quarter exacerbated the dampened consumer and business confidence further due to the cost impact on the economy.
Naamsa’s CEOs Confidence Index said influencing factors such as the upcoming national and provincial elections in the country, the persistent threat of load shedding and logistics constraints, oil prices, and currency fluctuations along with geopolitical conflicts posed significant risks to the overall economy.
Naamsa CEO Mikel Mabasa said a notable improvement in South Africa’s economic growth outlook was unlikely for 2024, but at a projected 1.2% by the SA Reserve Bank it would still be stronger than 2023 in line with the expected start of an interest rate cutting cycle, as well as lower inflation on average.
CEOs of selected imported brands as well as some CEOs in the heavy commercial vehicle segment expressed more upbeat prospects for their companies over the next six months.
“Economic headwinds continued to shape the new vehicle market’s performance during the quarter, including highly indebted consumers, the lingering effects of high interest rates, high food and fuel inflation, load shedding, and port backlogs and delays,” Mabasa said.
“Disappointingly, as a result of a weak fourth quarter 2023 performance, the new vehicle market has not been able to out-perform the 2019 pre-pandemic levels yet, after three years, despite being on track for most of the year.
“It is anticipated that the NEV regulatory framework details to be announced in the 2024 National Budget Speech by the Minister of Finance, would provide a much-needed injection of confidence for the South African automotive industry to accelerate its inevitable transition towards electric vehicle and associated component production.”
New energy vehicle (NEV) sales by 19 industry brands increased by 59.9% from 1 582 units in the fourth quarter 2022 to 2 529 units in the fourth quarter 2023.
Following a significant year-on-year increase of 421.7% from 896 units in 2021 to 4 674 units in 2022, NEV sales registered a further year-on-year increase of 64.6% to 7 693 units in 2023.
Naamsa said NEV sales breached the 1% share of the new vehicle market for the first time in 2023 comprising 1.45% of total new vehicle sales, compared to 0.88% in 2022
BUSINESS REPORT