Johannesburg – Higher interest rates, price inflation and a weak economic environment continue to drive new vehicle sales lower.
Figures released yesterday revealed that new car sales dropped last month by 6.1 percent to 32 826 units from the 34 947 units sold in February last year.
Sales of light commercial vehicles declined last month by 13.1 percent year on year to 13 161 units, while medium commercial vehicle sales fell by 12.9 percent to 659 units and sales of heavy trucks and buses fell by 2.3 percent to 1503 units.
Nico Vermeulen, the director of the National Association of Automobile Manufacturers of South Africa, attributed the steep decline in light commercial vehicle sales to model run outs and new model run ins.
Vermeulen said the car rental industry had again made a positive contribution and had accounted for 17.5 percent of new car sales last month, but it was clear the franchise dealers were taking strain with ongoing pressure on margins.
Azar Jammine, the chief economist at Econometrix, said the sales figures were indicative that economic conditions were tightening, especially among consumers, but not dramatically.
Jammine said this was quite consistent with the latest gross domestic product figures of marginal positive growth.
He stressed that new vehicle sales tended to be an exaggerated barometer of the direction of the economy.
“We’re certainly heading for a decline in new vehicle sales this year, but may get away with single-digit negative growth,” he said.
Nicholas Nkosi, the head of vehicle asset finance for retail banking at Standard Bank, said the recent cumulative 1 percentage point hike in interest rates, together with higher inflation, was affecting affordability.
Consumer shift
Nkosi said the average vehicle finance contract term had moved out further to 69.2 months, which was indicative of consumers stretching out the terms as much as possible and “trying to build in their own buffers”.
Rudolf Mahoney, the head of brand and communications at WesBank, said there was a clear shift in consumer buying patterns from new to used vehicles for affordability reasons.
Mahoney said WesBank’s data showed growth of 11.8 percent in finance applications for pre-owned vehicles, while applications for new car finance was relatively flat at 0.46 percent.
He said 52 percent of WesBank vehicle loan customers had opted for fixed interest rates, which bought them certainty and tied in with the uncertain economic scenario.