Weak economy dents car sales

File picture: Thomas Peter

File picture: Thomas Peter

Published Aug 4, 2015

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Johannesburg - Lacklustre economic activity, low business and consumer confidence and increased financial pressure on households are continuing to depress new vehicle sales.

New vehicle sales, a leading indicator of future economic activity, declined year on year last month for the fourth consecutive month. Figures released yesterday revealed that new passenger car sales slumped last month by 8.8 percent to 36 506 units from the 40 015 new cars sold in July last year.

Sales of new light commercial vehicles, bakkies and mini-buses declined year on year by 0.7 percent last month to 15 090 units, medium commercial vehicles by 1.6 percent to 841 units and heavy trucks and busses by 6.3 percent to 1 675 units. However, industry new vehicle exports grew last month by 24.4 percent to 28 291 units from the 22 736 vehicles exported in July last year.

Azar Jammine, the director of Econometrix, said the decrease in new vehicle sales reflected “the pretty soft economy” but stressed there were not any signs of a collapse of the new vehicle market.

Isaac Matshego, an economist at Nedbank, said the outlook for new vehicle sales for the remainder of this year remained unfavourable. He said passenger vehicle sales would be constrained by low consumer confidence, bleak job prospects, tight credit market conditions, elevated household debt levels and rising costs of non-discretionary goods.

Kamilla Kaplan, an economist at Investec, said the decrease in sales reflected a consumer market that was under pressure.

“Consumer confidence is at 14-year lows, which implies that many consumers will likely be reluctant to commit to purchases of big-ticket items, particularly if these are financed through debt at a time when interest rates are rising,” Kaplan said.

Nico Vermeulen, the director of the National Association of Automobile Manufacturers of SA, said sales of new passenger cars had slowed substantially despite attractive incentive packages on offer by most automotive companies and slower economic growth. Also the recent increase in interest rates was expected to put further pressure on sales of new cars over the balance of the year.

However, Vermeulen said a positive feature was the contribution of the car rental sector with more than one in six cars sold being purchased by car rental companies.

Marc Corcoran, the president of the SA Vehicle Rental & Leasing Association, said the vehicle rental industry was starting to upfleet but the average fleet of vehicle rental companies was not expected to increase this year.

Rudolf Mahoney, the head of brand and communication at WesBank, said it received another record number of finance applications last month but were unable to capitalise on this because of worsening household debt levels.

BUSINESS REPORT

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