Reason for optimism’ despite fall in car sales
CAPE TOWN - New vehicle sales in July may have provided an indication of what the “new normal” is for the auto industry as lockdown regulations ease and the economy begins opening, WesBank's head of marketing and communication, Lebogang Gaoaketse, said yesterday.
National Association of Automobile Manufacturers of SA (Naamsa) figures showed that new vehicle sales fell 29.6 percent to 32 396 units compared with July last year.
There was some improvement compared with sales in June, which were 30.7 percent down year on year at 31 867 units.
Gaoaketse warned it might be too early to define a trend, as the unknowns of the Covid-19 pandemic continue to be felt.
“We had begun to see uptake on fixed-rate deals thanks to the low-interest rates, and… a shift to earlier settlements of deals in July.
"We might have considered this as a result of consumers making affordability decisions in terms of monthly instalments, except the bank’s average deal size is between 10 and 15 percent higher year-on-year across new and used,” said Gaoaketse.
“We will require more data before we understand how buyer behaviour is changing,” he said.
Indebted consumers benefited from another cut in interest rates last monthin July. But households were faced with rising fuel prices of 7.5…percent, despite the price being 20.9…percent lower than a year ago.
Consumer price inflation was 2.2 percent although the overall food basket increased 4.2 percent.
“This continues to paint a picture of a hard-hit economy that will take time to recover,” said Gaoaketse.
Passenger car sales fared slightly worse than in June. Car sales in July fell 35.8 percent to 18 905 units compared with July last year. June sales had fallen 33.4 percent to 19 264 units.
Light commercial vehicle (LCV) sales, however, showed a dramatic improvement over June. July LCV sales were 19.7 percent down on July last year at 11 123 units, but this was 934 more units than sold in June.
The car rental market was dormant due to business travel and tourism business closures during lockdown.
WesBank said there was some reason for optimism: more market confidence could be expected once the onslaught of the pandemic began to slow.
Naamsa said also an improvement in the July export performance compared with June provided reason to believe that exports would gain upward momentum in the second half of the year, as international markets ease their lockdown restrictions, while many were also stimulating their new vehicle markets with financial incentives.
Investec economist Lara Hodes said economic activity had picked up in South Africa’s key export destinations, but there were supply side disruptions, and global demand was still subdued.
Further, second waves of infection in many countries could impede the pace of recovery, she said.
Hodes said the domestic demand environment was muted. Consumers had been battered by restrictions imposed by the government to limit the spread of the virus, and many businesses had closed down and salary reductions were widespread.