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Holidays, political events dent vehicle sales

Economy
Pretoria - New vehicle sales were severely dented last month by the proliferation of public holidays and the impact on the economy of political events that culminated in the country’s credit ratings being downgraded.

Total new vehicle sales slumped 13.4 percent last month to 34 956 units from the 40 348 vehicles sold in April last year.

Export sales dropped 25.5 percent to 24 449 vehicles from the 32 832 units exported in April last year.

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Sales of new passenger vehicles declined last month by 13.7 percent compared with April last year. Photo: Simphiwe Mbokazi

Nico Vermeulen, director of the National Association of Automobile Manufacturers of South Africa (Naamsa), said the lower sales could largely be attributed to the proliferation and configuration of public holidays last month. The Easter holidays had fallen in March last year.

Vermeulen added that, following the modest improvement in new vehicle sales during the first three months of this year, the outlook for the rest of the year had turned negative on the back of the extraordinary political events at the end of March and early last month.

This was a reference to the decision by President Jacob Zuma to reshuffle his cabinet, which included the replacement of finance minister Pravin Gordhan and deputy finance minister Mcebisi Jonas and resulted in Standard & Poor’s and Fitch downgrading South Africa’s foreign credit rating to “junk” status.

Azar Jammine, the chief economist at Econometrix, agreed with Naamsa’s reasons for the slump in new vehicle sales, but warned against undue pessimism.

Read also: Naamsa suspends projections of vehicle sales

Jammine said the statistical distortions to new vehicle sales last month caused by the proliferation and configuration of public holidays “was dramatic”, although the impact of political events could also not be ignored. But Jammine said the full impact of these events on new vehicle sales would become apparent only in the next few months.

Sales of new passenger vehicles declined last month by 13.7 percent to 22 452 units from 26 012 units sold in April last year.

Sales of new light commercial vehicles, bakkies and minibuses dropped last month by 13.3 percent year-on-year to 10592 units. Sales of new medium commercial vehicles fell 3.8 percent to 562 units, and sales of heavy trucks and buses declined 12.1 percent to 1350 units.

Downgrade

Rudolf Mahoney, the head of brand and communications at WesBank, said the South African new car market had last month immediately felt the repercussions of the ratings downgrade, and this had been compounded by the number of public holidays.

Mahoney said consumers who did purchase cars last month reacted sharply to the possible implications of the downgrade. WesBank’s data showed there was a 12.6-percent increase in vehicle finance agreements with fixed interest rates last month compared with March, indicating that consumers were hedging the risk of possible interest rate increases.

Mahoney said applications to finance the purchase of new vehicles declined 10.7 percent and applications to finance used vehicles fell 15.3 percent.

“There is no mistaking this behaviour as consumers and businesses reacting to the economic downgrade and factors that led to it. Those who are in the car market right now should spend prudently and prepare for an uncertain future,” he said.

Nicholas Nkosi, head of vehicle and asset finance, retail and business banking at Standard Bank, said the 13.7 percent drop in new passenger vehicle sales was slightly worse than expected. It was driven by a combination of the Easter public holidays and pressure on consumer affordability caused by an increase in the price of new cars.

BUSINESS REPORT

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