Disappointing start to new-vehicle sales in 2020

The 0.25% interest rate cut at the beginning of the year failed to stimulate new-vehicle sales in January, with the market taking a significant dive.

While South African consumers usually delay purchasing cars until the new year, boosting January sales as a result, last month’s numbers were lower than December 2019.

January’s 8.1% drop to 39,475 new-vehicle sales isn’t entirely representative as it excludes BMW SA, which has taken a decision to report its sales quarterly instead of monthly from now on.

“Taking BMW’s monthly average sales during 2019 into account, a more representative January sales picture may be in the region of 5.2% down,” says Lebogang Gaoaketse, Wesbank’s Head of Marketing and Communication. Nevertheless, January sales remained depressed for a particularly slow start to sales in the new decade.

Gaoaketse said the 0.25% cut early in the new year will hopefully still contribute to a more optimistic tone for the industry this year.

According to Naamsa the passenger car market (excluding BMW sales) in January declined by 1,500 cars (5.1%) compared to January 2019. Sales of new light commercial vehicles, bakkies and minibuses took a much bigger beating, and the 9,791 units sold last month were 16.3% down on January last year.

January 2020 was also a gloomy month for the medium and heavy truck segments which dropped 8% and 2.6% respectively.

Toyota retained its market leadership with 8,234 domestic new-vehicle sales in January 2020, followed by Volkswagen (7,944), Ford Motor Company (4,147), Nissan (2,894) and Hyundai Automotive (2,849).

“Sustained weak demand for domestic new vehicles continued in January 2020 on the back of depressed consumer and business confidence, weak economic growth, record-high unemployment and Eskom’s ongoing electricity supply crisis,” said Naamsa.

“The new vehicle market is expected to face further consolidation until SA breaks out of its low growth trap and the economy is put on a higher growth path. However, the likelihood of more regular load-shedding in the foreseeable future dim prospects for a recovery in the coming months.

“Some positive news during the month was the Reserve Bank’s cut in the repo rate by 25 basis points to 6.25%, which will come as a relief to consumers.”

The good news for the automotive industry is that the export market continues to grow strongly.

Export sales of South African built vehicles grew 17.7% in 2019 over the previous year, providing some measure of relief for local manufacturers, said Kriben Reddy, head of Auto Information Solutions for TransUnion Africa.

TransUnion said new-vehicle price increases have remained below inflation for more than two years now. Despite this, the number of new vehicles financed in the fourth quarter of 2019 fell 1.6% compared to the same period a year ago, although the number of used vehicles financed showed a 1.4% increase.

Part of the new-vehicle sales decline can be attributed to cash-strapped consumers increasingly opting for cheaper pre-owned cars instead. According to TransUnion, for every new vehicle financed, 2.09 used vehicles are currently financed — compared to a ratio of 2.03 a year ago.

“Consumers are opting for older vehicles as pressure on disposable income increases,” says Reddy.

“The percentage of cars (new and used) being financed below R200,000, R200,000 to R300,000 and over R300,000 has remained broadly consistent over the past seven quarters. This means that in real terms (allowing for inflation) consumers are spending less on cars, and opting for less expensive entry level vehicles.

“Consumer buying power has effectively remained flat, or fallen in real terms, for the past six years.”

Reddy says the good news for consumers is low price increases, low inflation rates predicted for 2020 and a range of marketing incentives from dealers, which include trade assistance to vehicle discounts.

“The challenge is that to get a customer into a new vehicle, you have to get him out of the old vehicle first. And in many cases, the very deal structures that are meant to stimulate the market – like offering terms of to 84 months on car finance – are having the opposite effect by taking customers out of the market for longer.”

_{SA’s top 20 selling new vehicles in January 2020}

_{VW Polo Vivo — 2,811}

_{Toyota Hilux — 2,681}

_{VW Polo — 1,761}

_{Ford Ranger — 1,735}

_{Ford Ecosport — 1,132}

_{Renault Kwid — 1,010}

_{Toyota Corolla Quest — 998}

_{Nissan NP200 — 967}

_{Suzuki Swift — 824}

_{Toyota Hi-Ace — 777}

_{VW T-Cross — 764}

_{Ford Figo — 722}

_{Hyundai Grand i10 — 697}

_{Isuzu D-Max — 672}

_{Toyota Etios — 622}

_{Toyota Fortuner — 611}

_{VW Tiguan — 546}

_{Nissan NP300 — 527}

_{Renault Clio — 506}

_{VW Polo Sedan — 503}

_{Source: Naamsa}

_{* List excludes BMW which reports its sales quarterly, and Mercedes-Benz and Haval, who report only their aggregate monthly sales (not by model range).}