Demand for new vehicle buyers in South Africa is expected to gradually increase in August as the pause of interest rates and easing consumer inflation should whet buyers’ appetite in spite of the decline in demand for passenger cars experienced in July.
The Automotive Business Council (Naamsa) yesterday reported that South Africa posted a marginal increase of 1.3% year-on-year in new vehicle sales in July.
According to Naamsa, aggregate domestic new vehicle sales in July increased by 567 units to 43 389 units, from the 42 822 vehicles sold in July 2022.
However, export sales increased by a significant 11 896 units, or 47.3%, to 37 064 units in July 2023 compared to the 25 168 vehicles exported during the same month last year.
Naamsa said the July export increases reflected the low base effect of the July 2021 KwaZulu-Natal riots shocks on production and exports.
Naamsa CEO Mike Mabasa said the pausing of interest rates at 8.25% in July by the South African Reserve Bank (Sarb), after 10 consecutive hike rates totalling 475 cumulative basis points of hikes since November 2021, was a sigh of relief for new vehicle buyers.
Mabasa said the main reasons behind the positive outlook were the unchanged rates, the improvement in economic conditions, lower fuel index recorded at 8.3%, food inflation revised lower at 10.3%, and notably, the consumer price inflation having gone below the Sarb’s target range at 5.4% in June.
The last time the consumer inflation was below the Sarb’s target of 3-6% was more than a year ago in April 2022.
“The unchanged rates and improvements in inflation rates bode well for the car market as the second largest household investment cost for many South African consumers, considering the distressed borrowing patterns amongst households as debt service costs share of disposable income remain high at 8,4%, on average,” Mabasa said.
“The Producer Price Index also significantly eased in June 2023 to 4.8%, compared to the 7.3% rate recorded in May 2023.”
Additionally, Naamsa said it was encouraged by the collaboration between the government and business, wherein 115 private company CEOs signed a pledge to help the government turn the tide on the well-documented economic challenges.
The pledge will assist in achieving sustainable development, and inclusive economic growth.
The auto sector will continue to be committed to assisting South Africa's recovery efforts and to strengthen investment under the leadership of Andrew Kirby, the immediate past president of Naamsa and the president and CEO of Toyota.
The July year-to-date new vehicle sales recorded a 4.4% increase to 309 359 units, 12 997 units higher compared to the 296 362 recorded for the same period last year.
On a monthly basis, the recorded 43 389 vehicle units for July reflected a decline of 3 411 units or a loss of 7.3% compared to 46 800 units sold in June.
New vehicles exported in the year-to-date in July increased by 19 029 units. or 10.0% to 209 900 compared to the same period last year.
On a monthly basis, the July exports increased considerably by 9 735 units, or 35.6% to 37 064 units compared to 27 329 units recorded in June.
BUSINESS REPORT