Cars travel on a main road in a traffic jam.

Johannesburg - New vehicle sales dropped by 2.3 percent last month compared to June last year, the National Association of Automobile Manufacturers of SA (Naamsa) said on Tuesday.

A total of 52,837 new vehicles were sold in South Africa in June this year, a decline of 1251 vehicles compared to the 54,088 sold in the same month a year ago, spokeswoman Theresa Lupberger said in a statement.

“The June, 2014 export sales total at 24,024 units reflected a marginal decline of 195 vehicles or a fall of 0.8 percent compared to the 24,219 vehicles exported in June last year.”

Naamsa believed the domestic market showed some resilience despite slow economic growth, high levels of strike activity, rising inflation, and exchange rate vulnerability.

It was still expected to face “headwinds” over the short- to medium-term, in sharp contrast to developments internationally, where vehicle sales were expanding in China, the United States, and Europe.

“However, continued improvement in global economic conditions would benefit SA vehicle exports during the second half of 2014 and in 2015,” said Lupberger.

Out of the sales reported in June, 83.8 percent were dealer sales, 8.3 percent were sales to the vehicle rental industry, 4.4 percent to industry corporate fleets, and 3.5 percent to government.

In June, 35,355 new cars were sold, a drop of 5.4 percent or 2017 units compared to June last year.

Sales of new light commercial vehicles, bakkies, and mini-buses reached 14, 556 units during June, a 4.5 percent or 621 unit rise compared to the same month last year.

“South Africa urgently needed stronger growth, faster employment creation, and a narrowing of the current account and fiscal deficits,” Lupberger said.

“The restoration of and improvement in domestic and foreign investor confidence represented a necessary pre-condition in this regard.”

The strike in the steel and engineering industry, which began on Tuesday, was unfortunate as it would further undermine investment sentiment and, if prolonged, increase the risk of South Africa entering a recession.

“The impact on vehicle production and exports would start to be felt if the industrial action continued beyond two weeks,” Naamsa said.

“The outlook for the automotive sector for the balance of 2014 was mixed.”

Domestic sales would continue to be affected by general economic conditions, exchange rate-linked new vehicle price increases, and upward pressure on interest rates.

“The domestic market was likely to register a decline, in volume terms, of around five percent compared to 2013 with the main impact in the new car and light commercial vehicle sectors.”

The heavy and extra heavy truck markets were expected to continue to hold up well.

In the case of exports, further improvement was anticipated during the second half of 2014 on the back of better global economic growth. - Sapa