South Africa’s economy faced persistent challenges throughout 2023, witnessing high lending rates, soaring inflation, and reduced household income. As a consequence, the populace encountered difficulties affording significant purchases such as automobiles, culminating in a fourth consecutive month of negative growth in domestic new vehicle sales during November 2023.
Naamsa’s latest New Vehicle Sales statistics revealed a notable decline in aggregate domestic new vehicle sales. The month recorded a total of 45,075 units, marking a substantial decrease of 4,911 units or a 9.8% fall from the 49,986 vehicles sold in November 2022.
The new passenger car market, comprising 29,384 units in November 2023, experienced a significant decline of 4,052 cars, representing a 12.1% reduction compared to the sales figures of November 2022. Concurrently, there was a 3.9% decrease in domestic sales of new light commercial vehicles, bakkies, and mini-buses, coupled with a 13.5% downturn in sales within the medium commercial vehicle segment.
The Bureau for Economic Research (BER) underscored that these statistics were notably worse than anticipated, marking the fourth consecutive annual decline in new vehicle sales. Naamsa emphasized that the market suffered its most substantial setbacks in November, echoing a trend observed since the start of 2021 during the recovery phase post the COVID-19 pandemic.
“Sales were 1.3% below the pre-pandemic levels of 2019 at the beginning of 2023. For the year to date, it is only 0.6% ahead of the same period in 2022, potentially missing out on returning to the pre-pandemic level after three years, contingent upon the December sales figures,” stated Naamsa.
WesBank pointed out that persistently high borrowing costs, elevated inflation rates, and the ongoing repercussions of load shedding have significantly impacted indebted households.
“The combination of high lending rates, inflation, and relatively reduced household income continues to restrain large purchases like new vehicles,” remarked Lebo Gaoaketse, Head of Marketing and Communication at WesBank.
Furthermore, WesBank highlighted a visible effect on the demand for second-hand vehicles, evident through year-on-year increases in deal duration and contract periods, signifying challenges in making new vehicle purchases feasible within household budgets amidst socio-political uncertainties.
The prevailing energy crisis involving Eskom and load shedding has added to the financial strain on households in South Africa. Gaoaketse emphasized that addressing this crisis remains a priority for households, diverting funds towards alternative energy solutions rather than new vehicle purchases.
The breakdown of reported industry sales showcased dealers representing 84.8% of sales, rental industry sales at 9.5%, government sales at 3.1%, and industry corporate fleets at 2.6%.
However, amidst these challenges, a glimmer of hope emerged in export sales. November 2023 recorded an increase of 25.5% in aggregate export sales, totaling 41,660 units compared to the 33,207 units in November 2022. Notably, light commercial market exports surged by a staggering 72% at 16,066 units, contributing significantly to the export market growth.
The outlook for the new vehicle market in 2024 remains uncertain, largely contingent on December sales contributing to the annual volume.
“Considering the economic headwinds this year, sales hovering around the mid-40,000 mark continue to present opportunities for consumers, dealers, and automotive brands,” stated Gaoaketse.