On the road during lockdown

Here's what motorists should know.

Meet Smokey Nagata

The man behind the legendary twin-turbo V12 Toyota Supra build.

New car sales: SA's vehicle market after 'Junk Status'

2017-05-03 19:31

Alex Parker

VEHICLE PRICES AFFECTED Following South Africa's 'Junk Status' declaration, WesBank and Standard Bank has given their input on how the vehicle industry has been affected. Image: iStock

Cape Town - New vehicle sales in all segments, with the exception of medium commercial vehicles, deteriorated sharply during April 2017, registering double digit declines, reports National Association of Automobile Manufacturers of South Africa (Naamsa).

Lower sales could be attributed to public holidays during the month, reports Naamsa. In 2017, the Easter holidays fell during the month of April, whilst in 2016 they fell during the month of March.

Wheels24 columnist Alexander Parker shares his insights:

Parker said: "New vehicle sales figures took a dive in April as punters stayed away from showrooms. A positive reading of a 13.7% dive in new cars sales might be that both Easter and the Mayday long weekends fell in the month, and that people don’t buy cars when they are on holiday.

"The truth is that we won’t really know for a month or two quite how badly news of South Africa’s credit downgrade and attendant economic malaise has hit consumer confidence. As much as people don’t buy cars when they’re on leave, equally neither do people take on debt if they are worried about the security of the their jobs and the potential for interest rate rises and tax rises required to fund the spiralling cost of government debt.

"Absa’s seasonally adjusted Purchasing Managers Index (PMI) plummeted to 37, plumbing depths not seen since 2009 and the worst of the global crash and our own problems with loadshedding. This is the first full survey since the cabinet reshuffle that led to SA’s credit downgrade and while strictly speaking a measure of business confidence not consumer confidence, it does indicate that people are very, very worried indeed about the state of the South African economy.

'It doesn't look too good'

"Because of the surfeit of public holidays last month it is hard to assign blame for a slump in car sales to the cabinet reshuffle and consumer confidence. But time will tell, and it doesn’t look too good.

"There are measures that the government could take to bolster the sector, but all of them would come at a cost to the fiscus, so it is unlikely that it will happen. The government could consider further tax breaks on locally manufactured vehicles. 

What do you think should be done to improve new vehicle sales in SA? What do you think are the biggest factors contributing to declining sales? Email us

"It could put its money where its environmentalist mouth is and incentivise the sale of cars with low carbon emissions, electric cars and hybrids. The value of personal mobility in a moribund economy is well established, but with government debt now at a gobsmacking R2.2-trillion and the cost of servicing it rocketing as a result of the finance ministry/treasury controversy, every cent will matter.

"None of this bodes well for the car industry in SA, and my greatest concern is for the more marginal brands. I’m not sure they will all survive this, and my fear is that some will follow where Daihatsu and Citroen have already gone – the exit."

READ: SA's new vehicle sales: Huge slump in April 2017

Naamsa 2017 April sales: information by Wesbank 

WesBank says: “This sales performance is not just bad news for the new vehicle industry, but also the country. Historically, the performance of the new vehicle market has served as a leading indicator for economic activity, suggesting that the outlook for year could be worse than initially forecast. One should also factor in that the April decline was compounded by several public holidays.”

WesBank says that confidence has been shaken by the news that ratings agencies have given the South African economy a “junk status” label and that the deteriorating Rand has already resulted in a notable fuel price increases and the prospect of negative GDP growth is also likely to result in a cycle of interest rate hikes. 

READ: SA Vehicle Price Index: The effect of nation's Junk Status on cars 

"Consumers who did purchase cars last month reacted sharply to these factors –  WesBank’s data shows a 12.6% increase in vehicle finance agreements with fixed interest rates, compared to March, indicating that consumers are hedging the risk of possible future interest rate increases.

WesBank’s internal data also has further insight into this sudden market reaction. Consumer demand for new and used vehicle finance, as measured through the volume of finance applications received, fell sharply over the last month. 
New vehicle finance applications declined 10.7%, while used vehicle finance applications fell 15.3%. Even though April only had 18 working days there was still a significant decline in market activity, with a 6.4% slump in the daily rate of applications received.

Wesbank added: “There is no mistaking this behavior as consumers and businesses reacting to the economic downgrade and factors that led to it.

"Those who are in the car market right now should spend prudently and prepare for an uncertain future.”

Read more on:    wesbank  |  standard bank  |  south africa  |  fuel price

There are new stories on the homepage. Click here to see them.