New-car sales gloomy as cash-strapped buyers wait for rate cut

Hopes of a sustained improvement in new-vehicle sales were dealt a blow on Monday when figures for August showed a 4.9% decline on a year earlier.

WesBank marketing head Lebo Gaoaketse may have stated confidently on Monday that overall economic prospects were right for vehicle market growth, but numbers from motor industry association Naamsa show actual recovery is not here yet.

Naamsa reported that 43,588 new cars and commercial vehicles were sold last month — down from 45,854 in August 2023. A year-on-year improvement in July had raised hopes that several months of market decline had finally ended.

However, while car sales were up 3.1% year on year in August, from 29,131 to 30,022, the overall market was dragged down by a 21.5% slump in sales of light commercial vehicles — mainly bakkies, but also minibus taxis. From 14,460 in August 2023, the number plunged to 10,709. Bakkie exports also suffered — down 24.1%.

Toyota South Africa president and CEO Andrew Kirby confirmed at the weekend that local production volumes of the Hilux bakkie, the company’s main export, were down 25% owing to challenges in meeting new exhaust-emission homologation standards set by the EU.

Even before it bans the sale of new petrol and diesel cars and bakkies after 2035, the EU is introducing stricter liquid-fuel standards, and Kirby said all Toyota plants serving the region were meeting the same problems. “We hope to comply by the end of the year,” he said.

Toyota’s Hilux woes are part of a wider export challenge for the South African motor industry. Compared with August 2023, shipments last month fell 34.3%, from 42,731 to 28,073. For the year to date, it is 16.8% in arrears, down from 253,699 to 211,035. Car exports are down 13%.

Recovery prospects

Naamsa laid most of the blame on “weak regional economic activity” in the EU. However, with inflation there declining, and expectations of an interest-rate cut this month, prospects for recovery were good.

In South Africa too, analysts said an expected September interest rate cut would encourage consumers to return to the new-vehicle market.

Gaoaketse said: “It is safe to assume that prospective buyers may have delayed their purchase decision during August in the hope of an interest-rate cut in September.” 

Brandon Cohen, chair of the National Automobile Dealers Association, said that, while interest rate changes typically take up to six months to affect consumer buying patterns, pent-up demand could cause a quicker response in the local market.

Domestic sales of commercial vehicles were a mixed bag in August. Besides the downturn in light commercials, sales of medium-sized trucks rose 8.1%, but those of heavy and extra-heavy trucks fell 23.5% and 9% respectively.

After eight months of 2024, aggregate domestic sales of new cars and commercial vehicles totalled 333,662, down 6.1% from 355,199 at the same stage last year.

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