Thirst for pricier cars fuels sales

Johannesburg - New vehicle sales in South Africa continued to recover in May, with higher income earners' demand for pricier cars driving growth.

New car sales jumped 36.3% during May to 18 876 units from the corresponding month last year, according to the National Association of Automobile Manufacturers of South Africa (Naamsa).     

"The 5.5% drop in interest rates since 2008, stable new vehicle prices and better loan finance approval rates have contributed to the strong recovery," said Naamsa, adding that exceptionally low demand for cars this time last year is responsible for a low base.

As far as credit approval rates go, Marcel de Klerk, managing executive of Absa Vehicle and Asset Finance, said all banks have relaxed their criteria but South Africans should not expect any further easing this year.

"Households still have high levels of debt and the consumers' affordibility levels have not shown a great improvment," said De Klerk.

"The quality of applications has not improved all that much," he said.

Absa Vehicle and Asset Finance has received 16% more applications for car loans so far this year. Approvals ratings have increased by 17%.

Most popular models

De Klerk said lower income earners are under particular pressure, which means that a good portion of new car sales growth is driven by mid- and upper-level cars. 

"The average vehicle we approve is priced between R170 000 and R200 000," he said.

Naamsa reported that the Toyota Corolla, the Mercedes C-Class and the BMW 3 series were all in the top five best selling models during May.

The top spot was reserved for the Volkswagen Polo Vivo, priced at just over R100 000, which has captured a good portion of the entry level car market since its launch in March/April. The Corolla, Mercedes C-Class and BMW 3 sold a collective 3 142 units during the past month against 1 933 units of the Polo Vivo.

Meanwhile, the annual sales growth of new cars is impressive but the 9% monthly increase between April and May failed to wow some commentators, who were expecting a better performance from this traditonally strong sales month.
 
"We are concerned about May when viewed from a daily sales rate perspective," said Jacques Brent, vice-president of marketing, sales and service at Ford Motor Company SA.

"We will need to see if that trend continues into the next few months," he said.

- Fin24.com