February’s new vehicle sales continued the decline that started in January. Total industry sales declined 8,1%, year-on-year, with 48 148 new vehicles sold through all channels. Year-to-date, the market has receded 7,6%.
Passenger car sales fell 6,1%, with sales of 32 825 cars, while Light Commercial Vehicles (LCVs) tumbled 13,1% with only 13 161 new vehicles sold in this segment. Combined sales for the remainder of the commercial vehicle segment were down 5.8% and also reflected a weaker market, although sales of extra-heavy commercial vehicles and buses saw slight year-on-year growth.
Sales through the dealer channel continued to wane, dropping 9,5%, year-on-year. As in January, the rental market grew and February saw year-on-year growth of 34% in this channel.
“February’s decline in the market is not unexpected, and we expect that this will continue to be the trend for the remainder of 2016,” says Rudolf Mahoney, head of brand and communications at Wesbank. “Once again, strong sales in the rental market helped mitigate the overall effect of the decline, and this is likely due to rental companies refleeting ahead of the March price increases. This growth comes off 2015’s low base, which saw rental sales decline 18% for the year.”
While new vehicle sales struggled consumers continued to flock to the used car market. WesBank’s data shows growth of 11,8% in finance applications for pre-owned vehicles. By contrast, growth in applications for new cars was relatively flat at 0,46%.
The decline in demand for new vehicles has been fuelled by a number of factors, including January’s more aggressive interest rate hike of 50bps, new car price inflation that continues to outperform CPI, and low levels of consumer and business confidence. These and other macroeconomic factors are putting consumer budgets under increasing pressure.
“January and February’s sales figures set a clear tone for this year’s new vehicle market. This is the start of a shift in buying patterns and we anticipate that consumers will start to buy down in the new vehicle market, or exit it altogether and opt to look for better value in the used car market,” says Mahoney.
WesBank advises prospective car buyers to budget carefully and plan for all mobility costs. With interest rates and new car prices on the rise, and set for increase throughout the year, monthly repayments will be higher than usual. This is likely to have an effect on insurance premiums.
Fuel prices will rise to accommodate an increased fuel levy, thus negating some of the recent price decreases. Oil prices are unlikely to decline further, so any depreciation of the rand is bound to result in fuel price increases.