New vehicle sales plunge 14% in June as affordability declines

Hyundai cars are seen at a customs terminal. REUTERS.

Hyundai cars are seen at a customs terminal. REUTERS.

Published Jul 2, 2024


Domestic new vehicle sales fell substantially in June by 14% to 40 072 units compared with the same month a year ago as the ongoing downward slope in the market that started last August continued.

The Automotive Business Council (Naamsa) said yesterday the decline was due to the constrained economic environment in the country, amplified by weak consumer and business demand.

Monthly export sales increased marginally by 3.6%, to 28 306 units in June over the same month a year ago.

The motor industry association congratulated the appointment of the new Cabinet in the Government of National Unity, and said the challenge was to put narrow political differences behind and for the seventh administration to create positive momentum and bring about tangible impact in the lives of South Africans.

Naamsa CEO Mikel Mabasa also welcomed Parks Tau, the newly appointed minister of Trade, Industry, and Competition, and said: “Minister Tau is no stranger to the auto industry and has significantly contributed to our sector in the past and we look forward to working with him as we re-imagine the future of the automotive industry, together.”

Overall, out of reported industry sales of 40 072 vehicles, an estimated 33 039 units, or 82.5%, represented dealer sales, an estimated 11% represented sales to the vehicle rental industry, 3.6% to the government, and 2.9% to industry corporate fleets.

The June 2024 new passenger car market at 26 928 units fell by 9% over the same month a year before. Car rental sales accounted for a sound 14.2% of new passenger vehicles sales during the month.

Domestic sales of new light commercial vehicles, bakkies and minibuses at 10 552 units during June 2024 decreased by a hefty 3 385 units, or by 24.3%.

Naamsa said South African households were grappling with consistent cost pressures in a weak economic environment with affordability remaining a decisive factor in new vehicle purchasing decisions.

Cumulative new vehicle sales for the first six months of the year were now tracking 7.6% below the corresponding period in 2023, in line with industry expectations of a taxing first half of the year.

“However, the markets seem to have responded positively to the announcement of the new Cabinet and along with a third month of no load shedding, further relief at the fuel pumps in July 2024 reducing inflationary pressure, and likely lower interest rates to commence before year-end, brighter economic prospects for the second half of the year are steadily improving,” Mabasa said.

Lebo Gaoaketse, marketing and communication head at vehicle financier WesBank, said affordability was the biggest factor limiting vehicle growth.

His view was supported by the TransUnion SA Vehicle Pricing Index, which showed that new vehicle prices rose 4.7% for the first quarter of 2024 compared to last year. The marginal increase in the average loan amount was evidence that many households were opting for one multipurpose vehicle rather than maintaining multiple vehicles, he said.

WesBank’s own data showed the average loan amount on a new vehicle increased 3.5% in June; the average deal duration increased 3.8% to over 51 months; and the average contract period was also now over 73 months compared to a year ago.

“These are all signs of affordability challenges that either indicate that consumers are holding onto their existing vehicles for longer or that they are forced to lower instalments by extending the loan period,” he said.

“Until we see some relief in interest rates to start combating affordability, new vehicle sales will continue to remain under pressure,” he said.