SA’s new vehicle market: Naamsa’s assessment

South Africa’s domestic vehicle market ended 2019 on a high note with aggregate new sales for December reaching 41 698 units – an increase of 1 678 units, representing a rise of 4,2 percent compared with the 40 020 units recorded during the corresponding month the previous year.

The December figure reflected a year-on-year volume increase of 9,1 percent in the new passenger car market, but a decrease of 6,7 percent in the case of light commercials. Sales of medium and heavy commercial vehicles also improved, increasing by 19,0 percent and 18,8 percent respectively year-on-year. In contrast, sales of extra-heavy commercial vehicles declined by 19,1 percent year-on-year.

While export sales recorded a significant decline in December – at 13 298 vehicles reflecting a fall of 18 124 units, or a fall of 57,7 percent compared with the high base of 31 422 vehicles exported during December 2018 – the industry still managed to surpass the previous year’s record figure, achieving an overall total of 386 863 units which represented a 10,2-percent improvement.

Commenting on the results, the National Association of Automobile Manufacturers of South Africa (Naamsa), said in a statement that vehicle sales were linked to the strength of the country’s economy, and the new vehicle market in 2019 had continued the downward trajectory experienced the previous year.

“Following the decline in new vehicle sales of 1,0 percent in volume terms in 2018 compared with 2017, the figure recorded for 2019 showed a decrease of 15 601 units, or 2,8 percent,” the statement said.

In real terms that represented a drop from 552 227 units in 2018 to 536 626 units last year, Naamsa attributing the fall to the subdued macro-economic environment, pressure on consumers’ disposable income and fragile business and consumer confidence. Even the lowering of interest rates by 25 basis points in July last year had not helped to stimulate sales.

“In an affordability-driven marketplace conditions continued to be characterised by a buying-down trend. Growth in the medium commercial vehicle segment could be an indication that customers are acquiring smaller vehicles due to the prevailing economic climate,” the statement said.

The following table summarises annual aggregate industry sales by sector since 2014:

Looking ahead to this year, Naamsa forecast a modest improvement in domestic new vehicle sales. Its outlook is summarised in the table below:

Explaining the forecast, the statement said South Africa’s gross domestic product rate too often found itself in negative territory during 2019. “An improved economic growth rate of one percent and above for 2020 should translate into improved customer and business confidence, as well as support new vehicle trading conditions. At this stage an improvement of around two percent in aggregate sales volumes year-on-year is projected. However, most automotive companies are planning their operations on the basis of a flat market.”

The statement added that while risks would remain for South Africa in 2020, opportunities would present themselves. “Downside risks for 2020 include the continuing load shedding crisis by Eskom with ripple effects on the economy, Moody’s pending decision on South Africa’s investment rating as well as a continuing weak domestic economic growth outlook. On the positive side, however, the country’s inflation has declined to well within the target range of between 3,0 percent and 6,0 percent and the industry’s exceptional export performance is set to continue.”