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Johannesburg - Weak Rand, interest rate hikes, price increases... vehicle sales in South Africa could see a major decline in 2016, reports vehicle finance specialist WesBank.
WesBank has forecast that total new vehicle sales will decline 12% in 2016. It says, compared to 2015’s industry total sales of 617 691 vehicles, only 543 306 units could be sold in 2016.
Vehicle sales drop in February
New vehicle sales in February continued the decline started in January 2016, reports the National Association of Automobile Manufacturers of SA (Naamsa).
Total industry sales declined 8.1%, year-on-year, with 48 148 new vehicles sold. Year-to-date, the market has receded by 7.6%.
Why the grim outlook?
WesBank’s forecast is based on the anticipation of a low GDP growth rate, changes in the interest rate, inflation, a downgrade of South Africa’s credit rating and the deterioration of the Rand.
Over the next three years the interest rate is likely to be hiked 125 basis points, keeping inflation within target bands. However, WesBank does expect that SA's credit rating will be downgraded to “non-investment grade”, or “junk” status.
Drop in SA car sales: outlook for 2016 is 'uninspiring'
The Rand, says WesBank, will continue to decline against the US Dollar, forecasting that in 2019 the Rand/Dollar exchange will be R17.20.
WesBank CEO, Chris de Kock, said: "The movement of the Rand will be key for the new vehicle sales performance in South Africa. A deteriorating currency will force manufacturers to increase prices more aggressively. This will push new vehicle price inflation well outside that of headline CPI, thus sending more buyers to the used car market.
"Interest rates will also play an important role in affordability and the demand for credit, as has historically been the case.”
How will this affect SA car sales?
The vehicle financier predicts that in the first half of 2016 industry sales will be down "10% year-on-year", with passenger car and light commercial vehicle (LCV) sales declining 10% and the remainder of the commercial vehicle segment falling 12%.
The second half of 2016 will be tougher, mainly due to accelerated price increases for new cars as well as higher interest rates.
It predicts passenger car sales will likely decline "15.5% year-on-year, with LCVs only down 10% for the same period". Sales of larger commercial vehicles will slide 14.4%, year-on-year, as businesses opt to not to replace existing assets with new models.
Combined, the full year will see passenger car sales end down 12%; LCVs 10% lower than 2015’s performance; and commercial vehicles down 13.3%, reports Wesbank.
