Sales of new passenger vehicles may increase in coming months, after falling since 2023 amid high interest rates and persistently high consumer inflation, which took their toll on household finances, according to a new survey from the Bureau for Economic Research (BER).
The BER’s third-quarter retail survey, which measures business confidence among retailers, showed a significant improvement in the outlook for business conditions and sales volumes for new vehicle dealers.
Confidence among new vehicle dealers rose by 17 percentage points to 27% suggesting that “the worst may have passed for the sector, with consumer inflation at 4.4% in August, a stronger rand, fuel price reductions and the start of the interest rate-cutting cycle”, said BER senior economist Helanya Fourie.
Consumer inflation has moderated markedly in 2024, dropping from an average of 6.9% and 6% in 2022 and 2023 respectively, to just below the SA Reserve Bank’s targeted 4.5% (the midpoint of the 3%-6% range) in August.
Consecutive decreases in fuel prices have been one of the main drivers of lower inflation.
The Bank now expects inflation to average 4.6% in 2024 (down from 4.9% previously), with fourth-quarter inflation forecast to average 3.6%.
The improved inflation outlook contributed to the Bank’s decision last week to cut the repo rate by 25 basis points (bps) to 8%. It is widely expected that the Bank will announce another 25bp cut in November, and more, similar cuts in 2025.
New vehicle dealers hope lower inflation, fuel prices and interest rates will improve consumer sentiment and boost car sales.
The Automotive Business Council (Naamsa) reported earlier in September that the year-to-date new passenger vehicle sales for end-August were down 4% compared with the same period in 2023. This after already declining by 4% for the year in 2023.
Sales of light commercial bakkies and minibuses were down about 11% for the year to end-August compared with the same period of 2023.
After rebounding slightly in July, new vehicle sales in August, across all categories, decreased by 2,266 units, or 5%, to 43,588 units compared with the same month in 2023.
Overall, business confidence among retailers increased by six percentage points to 45% in the third quarter.
“Consumers’ real disposable income is boosted by inflation [being] at a three-year low. The absence of load-shedding, the market-friendly election outcome, and expectations of an interest rate cutting cycle likely also contributed to the rise in confidence among retailers,” said Fourie.
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