Are you a glass-half-full or a glass-half-empty kind of person? Depending on your answer, you will be either delighted or dismayed at the state of the new-vehicle market.
Early this year, Toyota SA president Andrew Kirby predicted that sales would rise 16.3% in 2022, returning the market to pre-Covid-19 levels a year earlier than anticipated. In 2019, 536,612 cars and commercial vehicles were sold; Kirby’s 2022 prediction was 540,000, up from 464,493 last year.
No-one else was as bullish; other growth forecasts ranged as low as 8%. However, given that Kirby had been the only person to come remotely close to calling last year’s 22% rise, his 2022 forecast became the accepted target.
Even he appeared to underestimate the market when, at the start of the year, sales outstripped 2021 by nearly 20%. But as consumer and business hardships stacked up, that lead diminished. By the end of October, aggregate sales for the year were 13.11% ahead of last year — 437,467 against 386,754.
Within that number, car sales were up 19.8% (from 251,288 to 391,137), light commercial vehicles (mainly bakkies and minibuses) down 1%, medium trucks up 8.2%, heavies up 20.2% and extra-heavies up 6.3%.
WesBank marketing head Lebogang Gaoaketse says a full-year market of more than 500,000 is “definitely possible” in 2022. The National Association of Automobile Manufacturers of SA (Naamsa), in its latest quarterly bulletin, suggested it could top out at about 505,000, followed by 544,000 next year — though CEO Mikel Mabasa noted this week that the latest Absa purchasing managers’ index, which tracks expected business conditions in the manufacturing sector, is at its “most pessimistic” level since May 2020.
Volkswagen SA (VWSA) sales and marketing director Thomas Milz thinks that unless there is a sharp turnaround in the economy, the growth slowdown will continue in 2023.
Vehicle-rental industry confidence appears to be recovering. In October, it accounted for 17.4% of car sales and 13.1% of the total new-vehicle market.
Mark Dommisse, chair of the National Automobile Dealers’ Association (Nada), says it is “astounding” that the market is as strong as it is. Floods, strikes, load-shedding, increasing household debt, components shortages and rising interest rates and fuel prices could all have taken a far greater toll on sales.
Milz says sales have exceeded his expectations. Even April’s KwaZulu-Natal floods, which forced Toyota SA to shut its Durban vehicle assembly plant for four months, failed to inflict the expected market damage.
None of this means the market is returning to what it was. Within the overall numbers, there has been a major shift in buying patterns. In the car market, consumers are moving away from high-priced vehicles and towards smaller, cheaper models.
Premium brands are hurting. Audi SA head Sascha Sauer says that in the “good old days” brands such as his, Mercedes-Benz and BMW used to share up to 20% of the new-car market. That has more than halved.
Now, their shares are going to former fringe players such as Suzuki, Haval and Chery. They, with established import brands such as Hyundai, Kia and Renault, outsell not only the German giants but some high-volume local manufacturers too.
These new challengers are the beneficiaries of a broad restructuring of the SA market, which used to be the preserve of SA-made cars. Of 304,340 new cars sold in SA last year, 78.3% were imported. So far in 2022, imports have risen more than a quarter
SA has also followed the global trend towards sports utility vehicles (SUVs), which offer more flexibility of use than the traditional sedan or hatchback. That is why VWSA last week announced that it expects to build an SUV at its Eastern Cape assembly plant from 2025.
This market restructuring will move in a new direction when electric vehicle (EVs) sales take off, though it is anyone’s guess when that will happen. The government hopes to reveal its EV incentivisation policy in February but that is unlikely to unleash a buying wave. In the short term, EVs will remain the preserve of the well-off.
Among heavier vehicles, bakkie sales, down fractionally at end-October, are expected to close the gap by year-end now Toyota is building its Hilux again.
UD Trucks MD Filip van den Heede says that while truck sales are improving, the recovery is taking longer than expected. He also asks an important question: what is a recovery? For while the short-term target is to recover to 2019 levels, that year was a rotten one for the motor industry.
As the accompanying table shows, sales have been on an almost uninterrupted downward slope since 2015. This year’s 505,000, if it is achieved, is a world away from 2014’s 644,257. At the current rate of growth, say some analysts, it could take until 2027, and possibly longer, to regain those heights.
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