While the South African economy fails to meet its Gross Domestic Product forecast this year, new vehicle sales look equally unlikely to reach the softer levels of slowdown expected by WesBank in January. But while the country reeled to the sober mid-term budget speech this week, new vehicle sales managed to build on September’s stability and provide some level of optimism to the motor industry.
The new vehicle market remained positively flat during October, 0.2% up year-on-year to 51,978 units, according to results released by the National Association of Automobile Manufacturers of South Africa (Naamsa). But this is the first-time sales have breached the 50,000-unit barrier, providing some small hope of recovery during the final quarter of 2019. “October has also been the best-selling month every year since 2015, so the increase – however small – comes off a high base,” says Lebogang Gaoaketse, Communications, Social Media and PR Manager.
“The motor industry remains a key economic indicator, not only for manufacturing in terms of investment and jobs, but also in interpreting consumer and business confidence from behaviour on the showroom floor,” says Gaoaketse. “With year-to-date sales down 3.1% at the end of October, there is clear correlation between how we expected new vehicle sales to develop this year and where GDP has netted out.”
Finance Minister, Tito Mboweni announced on Wednesday a revised GDP outlook for 2019 at 0.5% growth against his February budget forecast of 1,5%. WesBank expected new vehicles sales to decline 1% this year. “Very simply, the economy remains tight,” says Gaoaketse.
“Motorists look likely to also have to face the news that e-Tolls are here to stay,” says Gaoaketse. “And while the currency battles and the possibility of ratings downgrades surface once again, household budgets will remain under pressure.”
In support of this plight, inflation news rises as one of the few shining lights of hope for consumers. “Inflation fell to its lowest level in almost eight years, while staying within the central bank’s target range for two-and-a-half years now,” says Gaoaketse. “Despite this, the impact of costs set by the state – like power, water and fuel – along with factors such as bailouts and lower-than-expected tax revenue, leaves little hope for further interest rate cuts right now.”
Passenger car sales grew 2.5% to 35,904 units in October, the second consecutive month of growth for the segment. “Reassuringly, dealer channel sales of passenger cars increased 5.6%, reflecting WesBank’s experience of increased applications year-on-year,” says Gaoaketse. “It should be noted that the rental market bought 10,119 cars in October, a significant volume and contributor to the industry total, albeit down 2.1% year-on-year.”
By contrast, Light Commercial Vehicles (LCV) sales tumbled 5.9% to 13,366 units, that picture only slightly better in the dealer channel where consumer demand slid 4.3%.
“The industry will certainly be breathing easier, but shouldn’t be holding their breath for relief for the rest of the year,” concluded Gaoaketse.
Click here for the October Motor Stats