Johannesburg - The National Association of Automobile Manufacturers of South Africa (Naamsa) has suspended giving projections for domestic vehicles sales in the face of uncertainty following last week’s wholesale cabinet reshuffle, the association said on Monday.
Naamsa said the performance of the South African automotive industry was closely correlated with the overall performance of the country’s economy.
“In this context, the key performance factors driving the industry include gross domestic product growth, the direction of interest rates and the exchange rate,” said Naamsa.
Naamsa said it would resume the guidance on domestic vehicle sales once there was greater clarity on the impact of the political events on the direction of the economy. But the association said the risk of lower vehicle sales was significantly on the downside.
Naamsa warned on the likelihood of exchange rate weakness and resultant higher inflation, upward pressure on interest rates, lower private investment spending, higher government debt servicing costs and lower tax revenue receipts.
According to Naamsa, South Africa’s new vehicle industry grew 2.1 percent last month, with total sales of 48 534 vehicles. Year-to-date, new vehicle sales increased by 1.9 percent, while, at 25 020, export sales declined 9.7 percent, compared to the 27 720 vehicles exported in March last year.
Read also: 1 900 jobs lost in vehicle industry
Nicholas Nkosi, the head of Standard Bank Vehicle and Asset Finance, Retail & Business Banking, said the new passenger vehicles grew by 2.1 percent year-on-year, despite reduced contribution from the rental industry. On the other hand, export sales were up 7.8 percent year-on-year.
“The current pressure on new car sales is likely to persist in the short-medium term driven by exchange rate volatility which is likely to impact new car prices,” said Nkosi.
Rudolf Mahoney, head of Brand and Communications at WesBank, said the March figures indicated the positive sentiment in the economy.
“There were a few contributing factors, including a strong rand and falling fuel prices. Consumers had many reasons to feel confident enough to spend money, and this is immediately evident in the new vehicle sales,” said Mohoney.
He said the current political environment had brought about “massive” uncertainty, with business and consumer confidence rattled, “and this will filter through to the ratings agencies as well”.
Nelisiwe Baloyi, the head of Absa Vehicle and Asset Finance, said the macroeconomic trends and the state of consumer and business sector finances and levels of confidence would remain important drivers of vehicles sales in coming months.