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New vehicle sales increase in June a welcome surprise

The unexpected extent of the upswing in the new vehicle market for the second month in a row exceeded expectations, despite ongoing increases in the total cost of ownership. File Photo.

The unexpected extent of the upswing in the new vehicle market for the second month in a row exceeded expectations, despite ongoing increases in the total cost of ownership. File Photo.

Published Jul 4, 2023


New vehicle sales surprised on the upside for the second month in a row as electricity supply stabilized, rising by a significant 14% from a year ago in June in spite of dwindling exports, the impact of rising interest rates and weak economic growth.

This comes as the aggregate domestic new vehicle sales rose to 46 810 units in June, from the 41 052 vehicles sold in June 2022, reflecting an increase of 5 758 units.

The Automotive Business Council (Naamsa) yesterday said that the upbeat new vehicle market performance was encouraging given the multiplicity of negative considerations which still outweigh positive ones during the month of June.

The unexpected extent of the upswing in the new vehicle market for the second month in a row exceeded expectations, despite ongoing increases in the total cost of ownership.

Naamsa said challenges confronting the economy and the automotive industry such as high interest rates, high inflation, and currency depreciation continue to strain consumers’ budgets, and affordability appears to be driving new vehicle sales, underlined by the top selling models in the market.

In addition to an easing in inflation by more than expected to 6.3% in May, as well as an improvement in significantly less daytime load shedding in June, another welcome development was the renewed collaboration between business and government to urgently tackle energy, infrastructure and transport logistics challenges, as well as combating crime.

Naamsa CEO Mikel Mabasa said if successful, the collaboration could assist to reduce policy uncertainty and promote a more predictable environment that would enable much higher levels of investment, growth and job creation and to break out of the low economic growth trap.

“Our industry’s commitment to South Africa and her people is not artificial and we will continue to do the right thing in order to preserve and create jobs and protect livelihoods,” Mabasa said.

“We are determined to contribute meaningfully towards the sustainable development of South Africa.”

For the first half of the year the new vehicle market was now 12 284 units or 4.8% ahead of the corresponding period 2022, while exports were 7 857 units or 4.7% ahead of the first half of 2022.

However, it is important to note that a year ago, the Toyota plant in Durban was incapacitated due to flood damage, which had an impact on overall sales volume.

The knock-on effects of the KZN floods on vehicle production and exports during May 2022 were visible in the June 2023/June 2022 monthly comparisons, especially in the case of the light commercial vehicle segment.

Vehicle exports performed weaker in June 2023 compared to the same month in 2022. Export sales declined by 12.6% from a year ago to 27 296 units in June 2023, compared to the 31 216 vehicles exported in June 2022, or a decline of 3 920 units.

Naamsa said export momentum remained upward on the back of further new model introductions by major exporters in the domestic market.

However, growing concerns about global stagflation, the economic impact and disruption of supply chains resulting from the protracted geopolitical conflict, and the pace of tighter monetary policy in major markets potentially posing the risk of a potential global recession, remained.

National Automobile Dealers’ Association (NADA) director Gary McCraw concurred that a steady flow of new models in popular categories was keeping South Africa’s vehicle sales positive.

“A consistent stream of new and updated models, particularly in high-volume segments, along with bettere availability of popular models, appear to be crucial factors in sustaining the growth trajectory of new vehicle sales in South Africa,” McCraw said.

“Nevertheless, witnessing continued growth in the challenging economy is encouraging, given that vehicle buyers are facing affordability pressures, a depreciating rand that drives prices higher, low business confidence, and political instability.”

Wesbank head of marketing Lebo Gaoaketse, however, said there was hope for better news for the economy and consumers during the second half of the year.

Gaoaketse said the good news for motorists was the petrol price reductions from Wednesday, the second set of decreases since the adjustments made during June.

“More stable fuel prices, hopefully fewer if any interest rate changes, first-half growth for the manufacturing sector as well as a strong recovery in exchange rates will all contribute to economic performance as a whole during the second half, as well as affordability for consumers in the market for a new vehicle,” Gaoaketse said.

“Fuel prices should best be construed as fluctuating as petrol and diesel prices vary and the overall price over a longer-term remains generally higher. This continues to place pressure on household budgets and the overall consideration of affordability for mobility.”