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New vehicle sales buoyed by clever use of maker incentives

By Roy Cokayne Time of article published Oct 3, 2017

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JOHANNESBURG - New car and light commercial vehicle sales grew surprisingly strongly last month, but were believed to have been driven by replacement demand and manufacturer incentives.

Azar Jammine, the chief economist at Econometrix, said yesterday that new vehicle sales last month were a mixed picture, with new car and light commercial vehicle sales “very encouraging” and better than expected, while lighter truck sales took a hammering.

Rudolf Mahoney, the head of brand and communications at WesBank, said new car and light commercial vehicle sales last month were better than expected, but attributed this to manufacturer incentives that were reducing the price of vehicles and a shift from used to new vehicles because of higher used vehicle prices caused by a supply shortage.

Mahoney said the average transaction value on used cars was 8.4percent higher last month than in September last year, and used car prices were increasing because of supply and demand issues.


He added that the average transaction value on new cars financed by WesBank had declined from R303000 in July to R301000 in August and R298000 in September. “Manufacturers are artificially decreasing car prices by giving value back to consumers and giving so much back that it is decreasing the amount we finance,” he said.

Mahoney said there had to date only been a marginal decrease in the average duration of vehicle finance contracts, which would be indicative of a sustainable recovery in the new vehicle market. Kamilla Kaplan, an economist at Investec, said low statistical base factors partially accounted for the improvement in year-on-year new vehicle sales.

“Indeed, consumer spending still faces headwinds in terms of persistently depressed consumer confidence, moderating real wage growth, deleveraging and tight credit conditions,” she said.


Figures released yesterday revealed that new car prices grew last month by 5.9percent to 33669 units from 31801 units in September last year, with the car rental industry accounting for an estimated of 18.9percent of these sales.

Sales of new light commercial vehicles, bakkies and mini buses increased last month by 11.7percent year-on-year to 14523 units and heavy truck and bus sales by 0.6percent to 1791 units while, medium commercial vehicles sales dropped by 10.4percent to 692 units.

Nico Vermeulen, the director of the National Association of Automobile Manufacturers of South Africa (Naamsa), said the medium and heavy commercial vehicle sales reflected generally poor investment sentiment in the economy.

Vermeulen said the domestic vehicle industry had over the past four months held up well in the current challenging economic environment and a number of factors had contributed to improved sales momentum. Vehicle export sales improved by 11percent year-on-year last month to 36359 units from the 32764 vehicles exported in September last year.


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