Motor companies, their dealers and even banks may need to offer “enticing incentives”, in the form of price cuts and lower interest rates, to stem the continuing decline in new-vehicle sales, says WesBank marketing head Lebo Gaoaketse.
After six months of unbroken decline, there is no sign of an immediate reversal of fortunes. Motor industry analysts are almost unanimous in their view that any recovery won’t happen in the first half of 2024. Exactly when may depend on the timing of this year’s general election.
Figures released on Thursday by vehicle manufacturers and importers association Naamsa showed that 41,646 new cars and commercial vehicles were sold in January. That was 3.8% fewer than the 43,294 of January 2022, making it the sixth successive month that monthly sales lagged those of 12 months earlier.
As usual, car sales were particularly hard hit. At 28,790, they were 6.7% below the previous January’s 30,863. The 15% share by car-rental companies could not mask the fact that individual buyers are losing their appetite for major financial commitments in the current economic climate.
Naamsa CEO Mikel Mabasa said rising household debt, high interest rates, food and fuel inflation, and load-shedding are all chipping away at consumer confidence. As if they weren’t enough, chaos at SA’s ports is keeping imported vehicles from intended customers and components from assembly plants.
“SA’s economic growth outlook for 2024, at 1.2%, though stronger than in 2023, remains a key challenge for the new-vehicle market in view of the close correlation between sales and the GDP growth rate.”
Gaoaketse adds: “With interest rates stable but still high, fuel price increases expected during February, consumer price inflation still on the high end of the target band, and elections looming, economic uncertainty is the reality for most households and businesses.”
Not everyone is feeling the pinch. Imported Japanese car brand Suzuki broke the monthly 5,000 sales barrier for the first time in January. Sales and marketing GM Henno Havenga says the brand has increased sales by more than 460% since 2017, and trails only Toyota and Volkswagen in the market.
Overall, though, Gaoaketse says the industry can’t afford to let the market slide continue unabated. “Banks may increase their risk appetite with lower quoted rates on deals to capture market share,” he says. “Brands and dealers will also be hungry to convert sales, offering enticing incentives that may provide an opportunity for the market to remain buoyant.”
Brandon Cohen, chair of the National Automobile Dealers’ Association, hopes this week’s state of the nation address by President Cyril Ramaphosa and the February 21 budget speech by finance minister Enoch Godongwana may provide good news for the market, but few others expect much.
Toyota SA Motors CEO Andrew Kirby recently predicted that SA’s aggregate new-vehicle market would grow by 1.5% in 2024, after its dismal 0.5% improvement last year. Electoral uncertainty would restrain sales in the first half of this year, after which there should be a “slightly more normalised” market.
Commercial vehicles fared better than cars in January. Sales of light commercials, primarily bakkies and minibus taxis, grew by 2.3% from a year earlier, medium trucks by 13.3%, heavies by 1.8% and extra-heavies by 11.6%.
Truck makers, though, are not expecting another year like 2023, when Transnet’s inability to offer a reliable rail freight service created a boom in demand for big trucks. UD Trucks Southern Africa marketing director Rory Schulz believes the road freight capacity gap has now been filled and significant further demand is unlikely. “We’ve peaked on the rail replacement cycle.”
He thinks the 2024 market will be about the same as last year.
MD Filip van der Heede says UD struggled to meet last year’s increased demand because of Durban port logjams that prevented imported vehicle kits reaching the company’s Tshwane assembly plant, where operations were suspended twice. “The biggest challenge for us is the unpredictability of Durban, but I hope we will have a better grip on things this year.”
Vehicle exports, having set a record in 2023, also made a stuttering start to the new year. At 20,242 in January, they were 2.1% below the 20,684 of a year earlier.
Several major export destinations, notably the US and UK, will hold their own national elections in 2024. These, combined with war and instability in Europe and the Middle East, and a generally sluggish global economic environment, are creating “an uncertain backdrop” for the export year ahead, says Mabasa.
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