Public holidays in March had a major impact on new vehicle sales. The consolidated sales data from the National Association of Automobile Manufacturers of South Africa (Naamsa) reports that new vehicle sales plummeted 14%, year-on-year, with only 47 631 new vehicles being sold.
Both passenger car and light commercial vehicle (LCV) sales fell dramatically, with respective year-on-year declines of 13.4% and 14%. Sales through the dealer channel were down 18%, year-on-year. Sales through the rental channel continued to contribute to activity in the new vehicle market and this segment saw year-on-year growth of 220% in March. However this was insufficient to limit the impact of consumers moving to the pre-owned market. Sales of buses, as well as medium, heavy, extra heavy commercial vehicles also fell more than 20%.
Year-to-date new vehicle sales are down 9.8% with the passenger market declining by 8.5% and the LCV market by 12.2% for the same period. Total dealer channel sales have fallen 13.7%, year-to-date, while rental sales have grown 62.7% this year.
“The March public holidays, combined with other economic headwinds, have had a very negative impact on the performance of new vehicle sales. With three fewer business days and consumers going away on holiday there was major disruption for car dealers,” said Rudolf Mahoney, Head of Brand and Communications at WesBank. “However, the public holidays are not solely responsible for these sales figures. The massive decline in commercial vehicle sales is attributed to low business confidence in the prevailing economic climate.”
Demand for vehicles, as measured through the volume of finance applications received, was also negatively affected. WesBank’s data shows that new vehicle finance applications slid 20%, year-on-year while demand for used vehicles declined 3%. Demand for used vehicles now outstrips new vehicles 2.36:1 – a figure last seen in December 2009.
“It’s safe to say that we’re now in a used market. Although demand softened slightly for used cars, it remains strong when compared to the rest of the market,” said Mahoney. “The used-to-new sales ratio now sits at 1.5:1, indicating that consumers who previously bought new are now taking their budgets to the used market. Those who have cars are also choosing to hold onto them for longer, further affecting vehicle sales.”
At the Car Of The Year banquet in March WesBank forecast that consumers are expected to shift to the used market this year, resulting in total industry new vehicle sales declining by12%. This view also takes into account the Reserve Bank’s revised prediction of low GDP growth and higher inflation. Interest rates are expected to rise over the next three years – in addition to the 50 and 25 basis points hikes already seen this year – and WesBank expects that South Africa’s foreign debt rating will likely be downgraded to junk during 2016.
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