Johannesburg - The tough economic environment is biting the new vehicle market, with car buyers either scaling down to cheaper models or shifting to the used vehicle market.
Figures released yesterday showed that new car sales dropped last month by 6.1 percent to 34 936 units from the 37 208 sold in January last year, despite strong sales to the car rental industry, which accounted for 24.6 percent of total car sales.
Sales of new light commercial vehicles, bakkies and mini-buses declined last month by 8.3 percent year on year to 12 074 units, medium commercial vehicles by 15.6 percent to 531 units and heavy trucks and buses by 12.5 percent to 1 074 units.
Nico Vermeulen, the director of the National Association of Automobile Manufacturers of SA (Naamsa), said model run-outs and model run-ins had played a role in the January sales numbers of light commercial vehicles.
But Vermeulen said Naamsa had reviewed downwards its outlook for new vehicle sales this year because of the poor economic growth prospects.
The new car market was now anticipated to decline this year by about 9 percent to about 375 000 units from the 412 826 new cars sold last year, while new commercial vehicle sales were expected to drop by between 3 percent and 5 percent, he said.
Buy-down trend
Nicholas Nkosi, the head of vehicle and asset finance, retail banking at Standard Bank, said the bank’s average deal size fell by 6.4 percent year on year from R315 058 in January last year to R294 925 last month.
He attributed this to the buy-down trend in new cars.
Nkosi said there had also been a more prominent shift from new to used vehicles and expected both these trends to continue as buyers shopped around for good deals and affordability.
Simphiwe Nghona, the chief executive of the motor division at WesBank, said its data for last month showed that 70 percent of all applications received were for used vehicles and 30 percent for new vehicles.
Nghona said WesBank’s new vehicle finance application volumes declined 6.4 percent year on year, while used car finance applications grew by 2.8 percent. He said it expected a continued shift to the used market throughout this year as cash-strapped and budget-conscious consumers addressed affordability.
Azar Jammine, the chief economist at Econometrix, said new car sales last month were in line with Econometrix’s expectations and were “not that weak” but attaining the kind of growth to be expected in the car market for the rest of the year.
Business confidence
Jammine said there was slightly greater weakness in the commercial vehicle market, which could be interpreted as a lack of business confidence for this year although it was dangerous to extrapolate a single month of sales.
Jammine said apart from the decline in business and consumer confidence, people were not fully taking into account the effects of the drought.
BUSINESS REPORT