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Industry insight: car sales show glimmer of hope, but we’re still in hot water

Toyota sold 3700 Hilux bakkies in South Africa in May 2021

Toyota sold 3700 Hilux bakkies in South Africa in May 2021

Published Jun 2, 2021


JOHANNESBURG - A year ago, motor vehicle retailers were resuming sales under Alert Level 4 and the market mustered 12 874 sales during May 2020. One year later and the picture remains subdued, albeit with more stability as the market recovery continues to gain some momentum. According to Naamsa, the new vehicle market sold 38 337 units during May this year. While unfair to compare this against May 2020 (up 197.8 percent), it is noteworthy that this represents a 7.6 percent growth over last month’s sales.

“The market continues its slow recovery in the face of a number of challenges and opportunities,” says Lebogang Gaoaketse, Head of Marketing and Communication at WesBank. “Interest rates remain at historical lows, providing some of the most affordable finance and consequently opportunities to purchase a new vehicle. However, price inflation against the backdrop of a subdued economy continues to be a barrier for many purchase decisions.”

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According to the latest Vehicle Pricing Index (VPI) released by TransUnion during May, new vehicle prices in South Africa rose at nearly three times the general inflation rate during the first quarter of 2021.

“When measured against WesBank’s average deal size, we can see a similar trend in the amount of finance to access these vehicle purchases,” says Gaoaketse. “Compared to a year ago, new vehicle finance agreements through our book are averaging a deal size of R356 313, up 11,2 percent, while pre-owned deals average R253 537, an increase of 10,6 percent.”

Demand for vehicle finance continues to be reassuring, however. “WesBank’s rate of applications remains robust, indicating an appetite for new and used vehicle purchases,” says Gaoaketse. “Attractive deals on the showroom floor and a growing need for replacement as that cycle increased over lockdown are contributing towards the market’s recovery.”

Supporting this demand, the passenger car segment sold 24,122 units during May, 85,1% of which were retailed through dealers to consumers. Dealer channel sales remain relatively robust and are 41,7% ahead year-to-date, for which retailers will be grateful. This segment was 7,1% ahead of April sales.

The Light Commercial Vehicles (LCVs) segment sold 11,930 units during May, 10% more than in April, improving the segment’s position significantly. Year-to-date sales in the segment are 68,5% higher than for the same period last year. Dealer channel sales in the segment accounted for 91,4% of sales.

“While May’s sales growth over April is welcomed, it should be noted that April sales were down on March figures,” says Gaoaketse. “This is indicative of the market’s slow recovery, but reassuring, nonetheless. As the industry prepares for the implementation of the Guidelines for Competition in the South African Automotive Aftermarket on 01 July, the motor industry has many opportunities to continue its significant contribution to the South African economy.”

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Mark Dommisse, National Chairperson, NADA

“New vehicle sales in South Africa are continuing to outpace forecasts as the industry recovers from the dire situation it experienced a year ago. This is very heartening, particularly the fact that dealer sales represented 87.8% of the total reported new vehicles sales of 38 337 units in May,” comments Mark Dommisse, the Chairperson of the National Automobile Dealers’ Association (NADA).

“Strong sales through the retail dealer channel means there is an improvement in consumer confidence, which is good news for the remainder of the year. Admittedly, the figures in April and May last year were very skewed, as our members operated under stringent lockdown regulations. However, the ongoing upturn in 2021 is an encouraging positive with Naamsa now forecasting year-on-year growth for 2021.

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“A year ago, dealers were resuming limited retail sales in May under lockdown Level 4, but now the market is improving significantly while we await the possible negative effects that could flow from a third wave of COVID-19 infections.

“The lockdown had a devastating effect on the rental industry which has resulted in a lack of year-old cars coming onto the used vehicle stands at dealerships. That is putting upward pressure on used car pricing. This, in turn, is impacting on sales volumes of preowned models. However, it is encouraging to see that rental companies are re-fleeting again and in May these companies bought 8.2% of total vehicles and 11.4% of the passenger car volume.

“We are seeing limited new vehicle availability in certain segments due, in main, to the global microchip shortage which is taking longer to overcome than was originally presumed,” adds Dommisse.

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“There were also significant sales in all the commercial vehicle segments, while exports, the lifeblood of the local vehicle manufacturers rebounded strongly too.

“Although the strength of the local new vehicle market lies with the lower priced model ranges, as well as the SUV and Crossover segments, there was also strong buying sentiment at the more premium SUV end of the scale being retailed in May,” explains the NADA Chairperson.

“It is also invigorating to see the introduction of and the appetite South African car buyers have for new model ranges, specifically in the Compact SUV segment, such as the Toyota Urban Cruiser, Toyota Starlet, Suzuki Vitara Brezza, and the ongoing stream of new models from Hyundai and Kia. Notable as well is, the Peugeot 2008 and the Haval Jolion, with Nissan set to join the fray with its Magnite crossover,” comments Dommisse.