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Johannesburg - The strength of the rand, which has effectively crippled some export industries, has made new cars more affordable and helped with the recovery of automotive sales over the past year, said economist Tony Twine.
The inflation rate of new car prices has halved to 7% this year compared to mid-2009, according to data from the National Association of Automobile Manufacturers of SA (Naamsa).
Twine said on Tuesday that this is partly due to the decline in imported vehicle prices, which has had a widespread effect on the market.
Car sales increased by 22.2% in October compared to the same month last year, according to data released on Tuesday by Naamsa.
Twine added that calls to weaken the currency may have a detrimental effect on the South African economy as a whole.
"If we deliberately set out to weaken the rand, it could bite us quite quickly," he said.
Rand strength, according to Twine, has moved in tandem with sluggish growth levels in the economies of the world's seven richest countries.
"If you have G7 economies growing slowly, you will want to put money in emerging economies like South Africa where yields are higher," said Twine.
"Therefore, weakening the rand could place us on the back foot if the G7 economies start looking more attractive."
Slower inflation rates on new cars have resulted in a dramatic recovery in local sales. This was despite the carbon emission tax on new passenger vehicles, which came into effect in September and resulted in an average 2% rise in vehicle prices.
Component manufacturers in crisis
To date 352 218 units have been sold in the domestic market, mainly to corprate and rental fleets ahead of the 2010 Fifa World Cup.
Sales were also boosted by interest rate easing, which has taken the prime lending rate down to 9.5%, the lowest level since early 1980.
"The consumer hasn't had it this good in a long time," said Twine, referring to the combined effect of low lending rates and low levels of car price inflation.
However, while the automotive industry may have been aided in its recovery by the strength of the local currency, related industries have not been so fortunate.
The National Association of Automotive Component and Allied Manufacturers (Naacam) has repeatedly said component manufacturers would be crippled unless action is taken to weaken the rand.
Naacam head Roger Pitot told Fin24 that parts makers face rand losses, further rentrenchments and possibly even closures.
Component manufacturers, which supply car makers at home and abroad, are competing with cheaper Far Eastern alternatives in both markets.
- Fin24
The inflation rate of new car prices has halved to 7% this year compared to mid-2009, according to data from the National Association of Automobile Manufacturers of SA (Naamsa).
Twine said on Tuesday that this is partly due to the decline in imported vehicle prices, which has had a widespread effect on the market.
Car sales increased by 22.2% in October compared to the same month last year, according to data released on Tuesday by Naamsa.
Twine added that calls to weaken the currency may have a detrimental effect on the South African economy as a whole.
"If we deliberately set out to weaken the rand, it could bite us quite quickly," he said.
Rand strength, according to Twine, has moved in tandem with sluggish growth levels in the economies of the world's seven richest countries.
"If you have G7 economies growing slowly, you will want to put money in emerging economies like South Africa where yields are higher," said Twine.
"Therefore, weakening the rand could place us on the back foot if the G7 economies start looking more attractive."
Slower inflation rates on new cars have resulted in a dramatic recovery in local sales. This was despite the carbon emission tax on new passenger vehicles, which came into effect in September and resulted in an average 2% rise in vehicle prices.
Component manufacturers in crisis
To date 352 218 units have been sold in the domestic market, mainly to corprate and rental fleets ahead of the 2010 Fifa World Cup.
Sales were also boosted by interest rate easing, which has taken the prime lending rate down to 9.5%, the lowest level since early 1980.
"The consumer hasn't had it this good in a long time," said Twine, referring to the combined effect of low lending rates and low levels of car price inflation.
However, while the automotive industry may have been aided in its recovery by the strength of the local currency, related industries have not been so fortunate.
The National Association of Automotive Component and Allied Manufacturers (Naacam) has repeatedly said component manufacturers would be crippled unless action is taken to weaken the rand.
Naacam head Roger Pitot told Fin24 that parts makers face rand losses, further rentrenchments and possibly even closures.
Component manufacturers, which supply car makers at home and abroad, are competing with cheaper Far Eastern alternatives in both markets.
- Fin24
