Naamsa looks to Godongwana as January vehicles sales plunge

File photos of a Hyundai car dealership. Picture: Karen Sandison/Independent Newspapers

File photos of a Hyundai car dealership. Picture: Karen Sandison/Independent Newspapers

Published Feb 2, 2024


THE National Association of Automobile Manufacturers of South Africa (Naamsa), which reported a 3.8% fall in sales of new vehicles for January, is looking to new energy vehicle (NEV) regulatory framework announcements by Finance Minister Enoch Godongwana in the National Budget Speech on February 21 to stimulate demand.

According to Naamsa’s NEV Roadmap report released last year, South Africa has to incentivise a sustained shift in domestic market demand for NEVs to attain a meaningful transition to the new models.

After some delay, Naamsa is now “looking forward to the new NEV regulatory framework details to be announced in the 2024 National Budget Speech on February 21, 2024” by Godongwana.

Naamsa said yesterday: “It would provide a much-needed injection of confidence for the South African automotive industry to accelerate its inevitable transition towards electric vehicle and associated component production and in stimulating demand for these new technology vehicles.”

This comes against the backdrop of slowing down demand and sales for new vehicles in South Africa. Sales of new vehicles have been falling over the past five months.

In January 2023, South Africa recorded 41 636 new vehicle sales on the domestic market, reflecting a decline of 3.8% compared to the same month last year. Export sales for the same period were also down by 442 units, or 2.1%, at 20242 units.

O the 41 636 vehicles new vehicles sales, about 35 108 units, or 84.3%, were accounted for by dealership sales while around 11.5% represented sales to the vehicle rental industry. An estimated 2.2% went to industry corporate fleets and and 2% to government sales.

Mikel Mabasa, the CEO of Naamsa, said, “The lingering effects of cost-of-living increases, dampened consumer and business confidence combined with the country’s port challenges and persistent load shedding continued to undermine the new vehicle market’s recovery path.”

However, sales for the medium commercial vehicle segment at 520 units reflected an increase of 61 units, reflecting a 13.3% rise. The heavy truck and bus segments of the industry also reflected a positive performance during the month under review, with the 1 455 units yielding a 7.9% surge comparable to the January 2023.

Weak performance in the the new vehicle market in January remained intricately linked to the major economic headwinds that shaped the market’s performance in 2023, said Naamsa. These include highly indebted consumers, high interest rates, high food and fuel inflation, load shedding, and port backlogs and delays.

With a weaker economic growth projection for this year, players in the South African auto industry believe new vehicle sales will continue to be under pressure given the “close correlation between new vehicle sales and the GDP growth” rate.

Lebo Gaoaketse, the head of marketing and communication at WesBank, said, “January’s weaker performance continued the trend in declining year-on-year sales the market has experienced since August. But this performance should consider more realistic market figures to compare against the previous year than the skewed data since the pandemic years.”

The year 2024 is also dominated by elections in South Africa and also in other major markets that South Africa exports vehicles to, further worsening the uncertainty for the industry and its prospects.

Nonetheless, the foreseen start of an interest rate cutting cycle, easing core and food inflation, and improvements in the country’s energy and logistics infrastructure could provide a much-needed relief for consumers.

This would stir up some momentum in the new vehicle market. The expected announcements of NEV regulations by the Finance Minister could also support the industry to transition towards newer energy efficient models and lift up sales volumes.

“Inflation is easing and interest rate cuts in major markets may be on the cards in the second half of the year, which would support the South African automotive industry’s export performance,” Mabasa said.