The slowdown in economic growth, combined with interest rate hikes, has negatively impacted South Africa’s new vehicle sales.
According to the latest figures from the National Association of Automobile Manufacturers of South Africa (Naamsa), sales of new vehicles during August declined 8,2% year-on-year.
A total of 51 055 new vehicles sold in August, compared to 55 610 in the same month last year. Passenger car sales declined 7,8%, year-on-year, with sales of 34 885. Light commercial vehicle (LCV) sales for the same period also declined 7,8%. Sales were down across all channels: dealer, rental, and government.
“Consumers and business have been under pressure all year, but July’s interest rate hike and the rand’s dismal performance this past month have taken a toll on the new vehicle market,” says Simphiwe Nghona, CEO of WesBank’s motor division. “New vehicle sales are regarded as a leading indicator for the country’s GDP. Looking at the monthly sales, which continues to trend downwards, it could be an ominous sign of things to come.”
WesBank’s data shows a sizeable increase in the demand for balloon payments. The number of deals incorporating balloon payments increased 32%, year-on-year, with nearly a quarter of all new cars financed making use of the facility. Additionally, the value of the balloon – the portion of the borrowed amount that will need to be repaid as a lump sum – has crept past the 30% mark.
“This month’s drop in the fuel price will be welcome, but this is ultimately only one piece of the motoring puzzle. Consumers cannot and should not rely on this small saving to plan their budgets,” says Nghona. “The sharp uptake in balloon payments is concerning. People are using this as a measure to make monthly instalments more affordable, but my best advice is to choose a more affordable car and avoid a balloon altogether.”