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South Africa’s new vehicle market grew by an aggregate of 4,6% in October, year-on-year, according to the latest sales data from the National Association of Automobile Manufacturers of South Africa (Naamsa).
While this growth appears significant, and in contradiction to the general economic sentiment, it is important to note that the dealer channel, which is much more representative of the actual performance of the market, is marginally down by 0,8%.
By contrast, the car rental market showed strong growth of 19% and single unit sales grew, largely in the public sector, by just short of 10%.
Year-to-date, the industry is still performing to expectations, growing 1,7% (with dealer sales growing 1,2%) against a backdrop of sustained political and economic uncertainty, low business and consumer confidence and low economic growth rates.
This contradictory sales performance is attributed to a number of factors, including increased marketing incentives from manufacturers and dealers, making vehicle purchases more attractive to buyers, as well as slowing sales in the used car market, due to higher price inflation and decreasing stock levels.
In terms of segmentation, pressure is emerging in the luxury segments, which provides further evidence that the host of negative factors are impacting all car buyers. The light commercial vehicle (LCV) and the commercial vehicle segments remain under pressure, declining 1,7% and 4,5%, respectively, which is reflective of the lack of investment in capacity building amongst corporates.
“Looking forward, we are of the view that the market will track sideways as the country approaches key political moments,” says Chris de Kock, group CEO of WesBank, “Recent developments have also increased the potential for an economic downgrade later this month, and this will add further stress the market which has benefited from a reducing interest rate environment. The weak Rand and rising oil prices will result in higher fuel costs, another vital input impacting the fortunes of the motor industry.”