New vehicle sales recorded their third consecutive month of negative growth in October, providing the suspicious pundits in the market cause for concern. But WesBank still has reason for optimism in the country’s new vehicle market.
According to figures released by naamsa the Automotive Business Council, South Africa’s new vehicle sales fell 2% year-on-year to 45 445 units in October, the fifth month of declining sales this year.
“While this in theory represents negative performance in the new vehicle market for half the year so far, the market should not see October’s performance as a curse,” says Lebo Gaoaketse, head of marketing and communication at WesBank.
South Africa’s new vehicle market shows year-to-date growth of 2,1% to 446 877 units compared to the first 10 months of last year, representative of the slow recovery broadly accepted. “This is a healthy 9 027 more new vehicles sold so far this year than 2022, which remains a positive step in the market’s recovery.”
Gaoaketse layers more context on the performance of the market when expanding the comparisons across a 12-month period year-on-year. “Looking at sales for the 12 months from November 2022 to October 2023 compared to the same period a year previously, shows a market performing 4,1% better. This displays the sensitivity of the market to impacting forces and the need for industry to take a longer view of growth as the market recovers.”
The recovery of the market continues to gain traction, returning to pre-pandemic levels and sale volumes last experienced in 2019.
“More room for optimism includes levels of demand that exceed market performance,” says Gaoaketse. “Despite the decline in volumes, the appetite for a new vehicle is strong, with applications up nearly 7% year-on-year.”
This pent-up demand provides opportunities for manufacturers to capitalise on with incentivised deals if banks can accommodate consumer affordability. “It is clear from WesBank data that customers are financing their vehicles over an extended term; and also holding onto their vehicles for longer,” says Gaoaketse.
WesBank’s book indicates that the average contract period has increased across new and pre-owned finance agreements compared to a year ago. So, too, had the average deal duration, which is a measure of how long customers remain in their cars before selling or trading into another vehicle.
The brunt of the market was felt across segments apart from growth in commercial vehicles, but off low volumes. Passenger cars declined 3,4% to 29,912 sales with dealers losing 6% in volume compared to October 2022. Not even Light Commercial Vehicles – which have provided consistent growth for most of the year – could get into positive territory, volume down 3% to 12 361 units year-on-year.
“There is no denying the economic headwinds that continue to face South Africans and the impact these will have on purchase decisions in the new vehicle market,” says Gaoaketse. “The market remains under pressure, but at relatively stable and reassuring levels.”