High rates, inflation hurt March vehicle sales

New vehicle sales in South Africa dropped 11.7% in March as traders bore the brunt of stubbornly high inflation and interest rates, which continue to diminish consumers’ disposable income.

The latest numbers from the Automotive Business Council (Naamsa) show that aggregate domestic new vehicle sales declined from 50 114 units in March 2023 to 44 237 units in March 2024. Year-to-date sales of new vehicles are 5.3% lower than during the equivalent time in 2023.

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Read: Another fuel price hike in April 

Naamsa said in a statement the effect of the “aggressive monetary policy stance” of the South African Reserve Bank (Sarb) in hiking interest rates took some time to filter through to new vehicle sales, adding to the prevailing negative sentiment.

“Due to ongoing cost pressures, including escalating fuel costs, along with interest rates, affordability remains a decisive factor in purchasing decisions as consumers increasingly turn to more budget-friendly vehicles.”

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This is evident from the fact that the light commercial vehicle category’s slump was considerably lower at 4.3%, compared to that of passenger cars, which dropped 15.9%.

Public holidays partly to blame

Industry players attributed the lower sales in March this year partly to the fact that the month had three public holidays that disrupted operations for both dealers and manufacturers.

“This period coincided with school holidays [and] as March marked the fiscal year-end for many companies, purchasing decisions were influenced by budgetary considerations, resulting in varied trading patterns,” said Brandon Cohen, chair of the National Automobile Dealers’ Association.

Vehicle financier WesBank said the fact that March 2023 recorded the best sales in the whole of last year further skewed the statistics, as most of the public holidays, which are usually in April, were in March this year.

“So, while March sales appeared dreadful, these [numbers] were only 1.1% down from February’s performance,” said Lebo Gaoaketse, head of marketing and communication at WesBank.

Improvement possible in second half

Naamsa cautioned that the economic growth outlook for 2024 remains mooted, but projections by the Sarb of a 1.2% increase in GDP mean it could outperform 2023.

The new vehicle market might improve in the second half of this year once the interest rate cutting cycle commences, along with the easing of inflation.

According to WesBank, consumers will be cautious with the upcoming elections on 29 May, which could dampen the industry’s performance in the first half of 2024.

“The broader economy remains a challenge for South African motorists. With interest rates unchanged once again, they remain high amid generally high inflation. Fuel prices increased again this week, continuing to pressure household budgets and their ability to service debt.”

Interest rates

The Sarb Monetary Policy Committee announced last Wednesday, 27 March, that it would keep interest rates steady for the fifth consecutive month. Interest rates are at a 15-year high. The repo rate is currently at 8.25%, and the prime lending rate of local commercial banks is at 11.75%. There was also little relief with regard to fuel prices, with petrol up 67c and diesel up 3c per litre from 3 April.

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Another fuel price hike in April


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South Africa’s consumer price inflation rate was at a four-month high in February at 5.6% (up from 5.3% in January). Stats SA will announce the inflation rate for March on 17 April.

The Sarb’s delay in cutting rates and the higher fuel prices, which drive up inflation, put even more pressure on already cash-strapped consumers.

Consumers under pressure

A comparison of finance applications for new vehicle purchases versus used vehicles highlights the fact that South African consumers are under severe financial pressure.

Figures from WesBank shared in an infographic on X show that there were 109 167 applications for finance for used vehicles, compared to 53 188 for new vehicles in March. This indicates that consumers continue to prefer used vehicles over new ones amid lower disposable incomes.

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The numbers on the vehicle export front were also no cause for celebration. Vehicle export sales for March this year fell by 27.1% compared to March 2023. Exports for the first quarter of 2024 were 4.9% down from the corresponding quarter in 2023. South African vehicles and components are exported to 152 international markets.

Notwithstanding the disappointing numbers, Naamsa is upbeat about export prospects for the remainder of 2024 on the back of new model introductions by major exporters.

It is also of the view that the global economic cycle is expected to bottom out in the first half of 2024, with lower inflation, the easing of interest rates, and modest global economic growth – which could support the local industry’s export performance.

Read: SA manufacturers turn upbeat

Harry Byrne

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