The miserable state of the new-car market will continue well into 2020, says Cyril Zhungu, Standard Bank’s head of automotive retail finance.
Figures released on Thursday by the department of trade & industry show new-car sales tumbled 8.2% in July from a year earlier, from 32,094 to 29,477. The total new-vehicle market, including commercial vehicles, fell 3.7%, from 47,856 to 46,077.
For the first seven months of the year, the total market also declined 3.7%, from 315,266 to 303,701. Cars slid 5.4%, from 208,367 to 197,014.
Zhungu says that despite last month’s marginal reduction in interest rates and fall in fuel prices, continued pressure on consumer budgets is accelerating the shift towards used cars. Research by automotive insights company TransUnion shows average new-car prices rose 3.1% in the second quarter of this year, against a 1% drop in used cars.
Zhungu sees no immediate respite for the market. “Even when the economy starts to recover, there will be a lag before it is reflected in increased new-vehicle sales,” he says. “That’s why I think the current weakness will extend well into next year.”
Mike Mabasa, CEO of the National Association of Automobile Manufacturers of SA (Naamsa), says that in a low-growth environment, plenty more has to happen before SA sees sustained improvement in business and consumer confidence.
National Automobile Dealers Association chair Mark Dommisse wants “structural reforms that deal with key underlying issues in the economy”.
Ghana Msibi, WesBank’s head of motor, says: “While the small interest rate cut during July was welcomed, it may take more incentive from the Reserve Bank to jump-start the economy and entice consumers back into the new-vehicle market. Another cut before the end of the year would be welcome and effective.”
Commercial vehicles had a better time of it in July. Sales of light commercials, mainly bakkies, rose 2.9%, medium trucks 14.9%, heavies 2.3% and extra-heavies 31.2%. For the year so far, with the exception of the low-volume medium market, up 12.9%, they are all on or just below 2018 levels.
Zhungu says last month’s surge was because companies could no longer delay fleet replacements. “There comes a time when you can wait no longer,” he says.
Exports again proved the motor industry’s saving grace, preventing production lines from gathering dust. Manufacturers shipped out 34,297 vehicles in July, a 22.1% improvement on last year’s 28,081. For the seven months to July, the total of 216,658 was 19.8% up on the previous 180,920.
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