Consumers in South Africa have put the brakes on buying new cars for the second month in a row due to high borrowing costs and rising fuel prices.
The Automotive Business Council (Naamsa) said yesterday that the decline in vehicle sales reflected external business factors.
According to Naamsa, aggregate domestic new vehicle sales fell by 4.1% in September, or by 1 963 units to 46 021 units, from the 47 984 vehicles sold the same month a year ago.
Export sales plummeted by 12.6%, or 5 217 units, to 36 247 units in September, compared with the 41 464 vehicles exported in September 2022.
Activity around the buying of new cars usually indicates the strength of consumers’ buying power and prevailing economic conditions potentially contributing to GDP growth.
Naamsa said factors beyond the industry’s control, such as higher fuel prices, challenges in transport logistics, Eskom’s incapacity to meet the industry’s energy demands, the volatility in commodity prices, and the intricate external environment, have exerted pressure on the automotive industry’s key performance indicators in September.
Wesbank said uncertainty seems to be getting the better of consumers and business as new vehicle sales registered their second consecutive month of declines year-on-year.
Wesbank head of marketing Lebo Gaoaketse said September sales show the biggest decline in market performance year-on-year since December 2021.
“The fact that there are now two consecutive months of strain, September seemingly bigger than August, provides some measure of concern for new vehicle sales. But it is the signs of the trend that are concerning, not the outright numbers,” Gaoaketse said.
Naamsa CEO Mike Mabasa said despite these challenges, the industry has displayed a modest yet commendable resilience in year-to-date new vehicle sales and export performance for September 2023.
Year-to-date new vehicle sales were 2.5% ahead of the same period, recorded at 401 315 units, while vehicle exports for the year to date were now 8.3% ahead of the same period last year, at a total of 285 200 units.
Mabasa said this resilience could be attributed to the relatively low production volumes emanating from the 2022 flood-induced interruptions.
“Although the South African Reserve Bank (SARB) maintained the repurchase rate at 8.25% in September, the automotive industry continues to grapple with concerns over consumer affordability,” Mabasa said.
“The most recent SARB report indicates a 0.3% contraction in household consumption expenditure, with household debt surpassing household disposable income by 62.5% in the second quarter of 2023.
“Additionally, the industry faces potential upward pressures from an elevated inflation outlook, fluctuations in the exchange rate, rising fuel prices, and increased energy costs.”
Overall, out of the total reported industry sales of 46 021 vehicles, an estimated 37 149 units, or 80.7%, represented dealer sales, while 6 241 units, or 13.6%, represented sales to the vehicle rental industry, 2.9%, or 1 321 units, went to corporate fleets, and 2.8%, or 1 310 units, represented sales to the government.
The September new passenger car market, at 29 669 units sold, registered a decline of 2 723 cars, or a drop of 8.4% compared to the 32 392 sold in September last year.
Mabasa also took umbrage at the recent data from Statistics SA showing that the manufacturing and finance industries were the core drivers of GDP growth in the second quarter of 2023, recorded at 0.6%.
Motor vehicles, parts and accessories, and other transport equipment grew by 9.5%, contributing 1% to the GDP.
“This unequivocally demonstrates that, despite the less favourable economic prospects, the outlook for the South African vehicle market in 2023 remains distinctly optimistic,” he said.
“The year-to-date new vehicle sales volumes and exports have held their own, indicating a positive trajectory towards achieving Naamsa’s forecasts of 563 000 for the former and 380 900 for the latter.”
The National Automobile Dealers’ Association (Nada) said motor vehicle retailers were witnessing strong evidence of pent-up demand for new vehicles, but many consumers are adopting a “wait-and-see” approach when making their purchasing decisions.
Nada chairperson Brandon Cohen said this caution was driven by the rising cost of living, which was putting pressure on private buyers’ finances, and the economic slowdown, which was dissuading businesses from replacing their vehicle fleets at this time.
“Sales remain under pressure, and September was generally a challenging trading month, although there were some sparks of positivity,” Cohen said.
“Applications to financial institutions for financing were slightly up, as were approvals, as consumers test the waters regarding their creditworthiness for a loan,” he said.
BUSINESS REPORT