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April vehicle sales offers a beacon of hope for the South African new car industry as sales rose 0.7% compared to April 2018, says Wesbank.
This is the first increase in sales this year and brings a slowly declining trend in sales to a halt, according to figures released by the National Automobile Association of South Africa (Naamsa).
Naamsa said the latest vehicle sales reflected a welcome surprise on the upside with export sales continuing to perform exceptionally well. The declining trend in the new vehicle market since the beginning of the year came to a halt in April 2019.
"While the market will no doubt be reassured by this good news, it should not grasp at any major turn-arounds just yet," warned Ghana Msibi, WesBank executive head of the motor division.
"The April market total of 36 794 units was still way behind March sales of 47 687."
While April sales are traditionally slower due to fewer selling days and the Easter holiday season, the marginal increase remains valid compared to similar trading conditions last year.
"Dealers, in particular, will have found some solace in the satisfaction of a 1.3% increase in sales through the showroom floor and the market swung in favour of passenger cars," said Msibi.
Passenger car sales rose 3.9% to 24 989 units while Light Commercial Vehicle (LCV) sales declined 8.1% to 9 810 sales during April compared to the same month last year. Dealers accounted for a wider spread in the split of sales with passenger cars increasing 6.9% and LCVs down 11.5%. This is in contrast to recent dealer channel performance where LCVs have out-performed passenger cars.
"Household budgets are continuing to remain under pressure and consecutive months of petrol price increases will no doubt begin to take their toll," said Msibi.
"Combined with the natural uncertainty ahead of May elections, the April sales performance becomes even more reassuring as these conditions could easily have resulted in the continuing decline trend."
Total market sales year-to-date are down 3.7% compared to 2018, passenger cars accounting for a 6.2% decline while LCVs are up 0.7%.
According to the Nedbank Economic Unit, the vehicle market is likely to record some gains during 2019 in line with the anticipated recovery in overall economic activity, although the improvement will be modest and could be weakened by power disruptions and uncertainty.
It sees April's sales figures as in line with other indicators of real economic activity, which continue to reflect the generally subdued economic environment.
"There is unlikely to be any significant build up in demand pressure on prices as economic activity and underlying confidence remain weak," commented Nedbank.
Meanwhile, Momentum Investments expects discretionary spend on items, such as new vehicles, to remain under pressure given ongoing consumer headwinds, including pressure on disposable income. However, the Naamsa forecasts an increase in momentum in vehicle exports for the remainder of 2019.
Investec economist Lara Hodes said the consumer continues to remain constrained, burdened by rising administered prices (especially electricity and fuel prices) and muted levels of income growth. As such, we do not anticipate any meaningful uptick in new vehicle sales in the near-term.
