I hope I’m wrong (my wife says I invariably am), but it looks increasingly likely that South African new vehicle sales in 2023 will struggle to meet forecasts. At the end of March, the market was 2.4% ahead of where it was at the same stage of 2022. By the end of April, the year-on-year gap had halved to 1.2%.
Early this year, most growth predictions for the full year were between 5% and 8% — well below levels enjoyed in the immediate post-Covid recovery period (22% in 2021 and 13.9% in 2022). That was to be expected. Now, given the way things are going, I suspect most marketers would bite your hand if you were to offer them guaranteed industry growth of 5%.
Cyril Zhungu, Standard Bank’s head of automotive retail finance, thinks it’s potentially still achievable. Sales usually improve in the second half of the year, particularly when rental companies stock up with new vehicles ahead of the annual holiday season.
Mikel Mabasa, CEO of Naamsa, says market conditions will be “reserved” for most of this year. In other words, hope for the best but don’t bank on it. Or, as National Automobile Dealers’ Association chair Mark Dommisse puts it: “We trust that the proven track record of the motor industry will prevail and future sales may not be as badly affected as some people are forecasting.”
Naamsa figures published this week show that April sales of new cars and commercial vehicles totalled 37,107. That’s 25% lower than in the preceding month, March, when the market was only seven shy of 50,000. If you’re a determined optimist, you will note that the 37,107 was 0.2% better than April 2022, but you’d be clutching at straws.
True to the old dictum of “lies, damned lies and statistics”, the comparison hides the fact that April 2022 was itself a stinker of a month, after floods halted production at Toyota’s Durban assembly plant and disrupted operations at the city’s harbour, which is the motor industry’s main import gateway.
Look behind this year’s figures and you’ll see that cars are the main cause of the overall market weakness. In April, sales fell 6.1% compared with the corresponding month in 2022 — from 25,735 to 24,174. After four months, they are 2.5% behind 2022 — 116,421 against 119,379.
Reasons for the sales slowdown aren’t hard to find. Inflation, a weak rand and load-shedding are among the main contributors. The International Monetary Fund’s forecast that real GDP growth in South Africa this year will be 0.1% shows the depth of the economic crisis in which consumers must make difficult purchasing decisions.
Over the past two years, sales had been restrained by supply issues. Shortages of key components prevented vehicle manufacturers, here and overseas, from meeting production targets. Zhungu says the problem now is one of affordability. It must be viewed “from a pure economics point of view, including the convergence of various factors such as higher consumer and vehicle inflation, which, together with increasing administered prices, will put pressure on consumer disposable income”. Still, he thinks the market remains “resilient”.
Reasons for the sales slowdown aren’t hard to find. Inflation, a weak rand and load-shedding are among the main contributors
WesBank marketing head Lebo Gaoaketse calls it “lacklustre”. He says economic circumstances are throttling sales and that a quick fix is unlikely. With yet another interest rate hike on the cards this month, he says: “The impacts that are throttling the market should be expected to continue for some time. Consumers should be carefully considering their vehicle requirements within their affordability to manage their budgets — and responsibly limit their indebtedness.”
Banks are doing their best to make that happen. Credit finance applications at some institutions are rising but Dommisse says approval rates have dropped. Then there are the people who apply, then realise they simply can’t afford to go further. “The (un)willingness to commit limits sales,” says Gaoaketse.
Toyota once again headed the list of car sellers in April, with 5,257 sales. It was followed by Volkswagen (4,054), Suzuki (3,526), Hyundai (2,127), Kia (1,381), Renault (1,355), Chery (1,179), Haval (1,042), BMW (966) and Nissan (553).
Naamsa also reports that sales of electric vehicles grew 18.8% in the first quarter of 2023.
The market for commercial vehicles is holding up better than that for cars. Corporate customers need to renew their fleets to support their business. Compared with a year earlier, says Naamsa, April truck sales were 20.3% better. Light commercials, mainly bakkies and minibuses, rely on a combination of corporate business and private demand. They were 11% stronger last month, though, once again, it must be remembered that Toyota lost Hilux bakkie and Hiace taxi production to last year’s floods. For that reason, we’re likely to see artificially strong comparative growth in light commercial sales over the next two or three months.
The same could be said of vehicle exports. After three months of lagging behind 2022 figures, they finally crept ahead in April. Shipments of 30,756 last month outdid April 2022’s 27,117 by 13.4%. For the year to date, they are now 0.1% ahead. Without the lingering effects of floods and harbour turmoil (we hope) this time round, that margin should widen in coming months.
Mabasa says it’s in everyone’s interests that both domestic and export sales hold up. Vehicle manufacturers directly employ more than 33,000 people, and components suppliers another 83,000. Throw in dealerships and other industries servicing the automotive sector, and there are “more than 1-million other workers across the entire auto value chain in South Africa”, he says.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.