Local new car sales show slight improvement in September
Sighs of relief could be heard across the motor industry as September sales steadied after a torrid August. While dealers could still be heard bleating amidst the decline, they must surely have been more positive about volumes on the showroom floor.
According to results released by the National Association of Automobile Manufacturers of South Africa (Naamsa), September sales slid only 0.9% year-on-year to 49,191 units, the biggest sales month of the year so far. “On the upside, there were 3,707 units more volume in the market during September than in August,” says Ghana Msibi, WesBank Executive Head of Motor.
The month was marked by three economic factors that could have contributed to the improvement. Consumer Price Inflation results announced during the month came within target at 4.3% albeit marginally up from July results, which were at a seven-month low; consequently interest rates remained unchanged although hopes for a further cut before the end of the year remain; and GDP numbers for the second quarter headlined growth of 3.1%, dodging recession and surely raising confidence.
“WesBank’s own inflation data largely mirrors that of the general economy, our average deal size slightly above the South African number,” says Msibi. “This infers that new and used car price inflation falls within the general affordability challenge for cash-strapped South African households. Of greater concern is the need for South Africans to extend their car repayment contracts towards the maximum 72 months, while adding balloon payments to reduce the monthly instalment amount. Consumers should remain cautious of over-extending themselves and should rather buy at a more affordable price than use other finance mechanisms to fall within budget.”
In the passenger car versus light commercial vehicle (LCV) see-saw, it was the latter’s turn to slow down more during September. Passenger car sales actually increased 1.1% to 33,139 units compared to September last year and – importantly – put another 4,136 units into the market compared to August 2019. The additional volume was largely courtesy of the rental market as dealer channel sales in the segment shrank 1%. LCVs declined 6.2% overall to 13,473 sales.
While September sales represented the largest volume month for the year so far, it was the second-best performing month year-on-year after April’s 0.7% increase.
“The bank’s forecast for the year always relied on a better-performing second half,” says Msibi. “The delay in any signs of improvement have thwarted industry to achieve these numbers. But on a practical business level, industry should be pleased by the September numbers and will be hoping that remains a trend as we enter the fourth quarter.”
Year-to-date sales are 3.5% down on 2018, the market having sold 398,341 units to the end of September.
“There are definitely more positive economic indicators that will hopefully stimulate improved consumer and business confidence,” says Msibi. “If the country can sustain these conditions, the motor industry should enjoy some relief to the end of the year, while South Africans might be able to reap some reward.”