NEW vehicle sales in February fell year-on-year, continuing a trend that started in August 2023, as economic pressure and political uncertainty continue to impede growth and consumers downsize, the National Automobile Dealers’ Association (Nada) chairperson, Brandon Cohen, said on Friday.
Domestic sales of new vehicles fell 0.9% in February compared with the same month a year before.
Statistics released on Friday by the National Association of Automobile Manufacturers of South Africa (Naamsa) showed new vehicle sales in February at 44 749 units, a decline of 413 units over February 2023.
“The market faced headwinds from the recent fuel price increase and anticipation of another hike (this) week. The budget speech further strained consumer pockets, compounded by the looming general election. Reserve Bank Governor statements on maintaining high interest rates have added to the prevailing negative sentiment,” said Cohen.
He said there were some positives. Light commercial vehicle sales improved 2.5%, the heavy truck market showed robust demand with a 14% month-on-month increase, while dealer sales accounted for 37 913 units, or 84.7% of total sales, indicating some consumer appetite, supported by dealership incentives.
"We observe a trend of consumers downsizing and conducting extensive research into pricing and financing options. Affordability remains a crucial factor in purchasing decisions,” Cohen said.
“Consumers are adapting to budget-friendly options, including Chinese-manufactured vehicles, marking a significant shift in the industry landscape,” he said.
Wesbank head of marketing and communication Lebo Goaketse said: “February sales were the smallest decline over the past seven consecutive months. The month also represented a fairly robust volume, which was slightly higher than the average monthly sales last year.”
Export sales grew well, by 27.5% to 39 517 units in February 2024.
An estimated 37 913 units, or 84.7%, represented dealer sales, an estimated 9.6% represented sales to the vehicle rental industry, 3.4% to government, and 2.3% to industry corporate fleets.
The February new passenger car sales at 28 857 units declined by 3.1%.
Car rental sales accounted for 12.9% of new passenger vehicles sales during the month.
“The persisting economic strain remains a real concern for household income and the weak new vehicle market reflects that middle-income households are restricting big financial commitments for items such as vehicles at present,” Naamsa said in a statement.
The organisation predicted that the ripple effect of higher interest rates, higher fuel prices and no relief for personal income-taxpayers in the 2024/25 tax year would continue to impact household incomes for the foreseeable future.
With the general election announced to take place on May 29, economic uncertainty would remain the reality for most households and businesses.
Naamsa said brands and dealerships were currently offering enticing incentives to prospective buyers, but some upward momentum was only likely to be sparked once the interest rate cutting cycle commences, likely during the second half of the year, along with easing inflation.
Europe continued to dominate vehicle exports as a region and accounted for 301 640 units, or 75.5%, of the record 399 594 vehicles exported in 2023.
Naamsa CEO Mikel Mabasa again welcomed the announcement by Finance Minister Enoch Godongwana during his annual Budget Speech of the government’s support for the transition to electric vehicles (EVs) through a strategic and investment-driven plan.
“This allowance enables businesses and investors involved in EV production to claim 150% of qualifying investment spending in the first year. This financial incentive is a crucial step in attracting investments, fostering innovation, and driving the growth of the EV sector within South Africa.
“In the short term, the existence of low local content necessitates the government’s consideration to support other key technologies such as traditional hybrids and plug-in hybrids,” Mabasa said.
BUSINESS REPORT