Publications
Partners
Cape Town - South Africa's new vehicle sales fell 1.2% year-on-year (y/y) in January to 52 306 units, data from the trade department showed on Monday, which was mainly driven down by about a 10% reduction in rental sales.
However, export sales jumped 20.7% y/y in January to 16 708 vehicles.
Rudolf Mahoney, head of research at WesBank, said that from a consumer perspective, vehicle sales remained flat in comparison with January 2014, with just a marginal decline of 0.1%.
This was in the context of a very strong December in 2014 with over 10% growth in dealer sales, he said.
“Looking at the rental sales for 2014, it was down by almost 11%, whilst the second half of 2014 of rental sales grew by double digits, which does seem to show a shift in buying patterns in rental companies, where they are extending the refleeting cycle towards the second half of the year,” he said. “That’s what affected some sales from January sales.”
The higher December sales were due to the performance of the rand and the increase in CPI, he said. “Manufacturers had to increase car prices several times last year and I think a lot of customers brought their car purchases forward in time to avoid the New Year car price increases,” he said.
Listen to the full interview:
The WesBank mobility index tracks all of a customer’s monthly mobility expenses, such as the costs to own and run a car. “It’s now cheaper to own and operate a car due to the reduction in the fuel price than it was in January 2014, so there is a little extra cash in the customer’s pocket to spend towards a car,” he said.
Mahoney was optimistic that car sales would improve in 2015. “We have a very stable interest rate environment, the price of fuel seems to be coming down …, the manufacturers are offering a lot of assistance and marketing incentives for the trading of old cars,” he said. “So, the overall environment is quite conducive for a strong new car market.”
Good signs of growth
Nicholas Nkosi, head of Standard Bank vehicle and asset finance for personal markets, said passenger vehicles and the export market showed good signs of growth.
“Whilst [it is] difficult to read too much into the January numbers given volatility in December and January, the trend is generally positive for passenger vehicles and the export market,” he said.
“New vehicle sales prices will continue to remain at current levels given the exchange rate, whilst we should see the pre-owned/used car market showing strong performance in 2015.”
Nkosi pointed out that the month of January 2015 experienced a 1.65% increase in sales compared to December 2014.
He said m/m passenger vehicles increased by 2.94%, while light commercial vehicles increased by 3.86%.
He said y/y monthly comparison shows a marginal decrease in January 2015 compared to January 2014.
Exports decreased in January 2015 by 23.46%, said Nkosi. “Passenger vehicles for exports decreased by 7.72% while light commercial vehicles decreased by 42.25%.”
Year on year monthly comparison shows an improvement in exports of 20.68% in January 2015 compared to January 2014.
The new car market experienced a fall of 3.60% in January 2015 compared to January 2014. The car rental industry contributed 15.3% to the new car sales in January 2015.
AMH & AAD increased in January 2015, 5.38% m/m.
“New business experienced positive m/m growth of 19.8% in the new vehicle market, while used vehicle market grew by 5.8% m/m (January 2015 versus December 2014).
“Passenger vehicles and Light Commercial vehicles both had positive month on month growth, 14.1% and 23.3% respectively.
He said vehicles increased by 11.8%, while light commercial vehicles declined by 6.6%.
The average contract term increased from 65.7 months in January 2014 to 68.0 months in January 2015 (3.6% y/y growth).
The average deal size increased from R265 960 in January 2014 to R314 312 in January 2015, 18.2% y/y increase.
Graph: Lightstone/Naamsa
Factors impacting car sales
The SA Reserve Bank (Sarb) left the repo rate unchanged at 5.75% following its January MPC meeting, said Nkosi. The outcome was in line with the industry’s forecast.
A cut in interest rates would require a sustained decline in the inflation rate and inflation expectations, he added. “Inflation expectations remain uncomfortably close to the upper end of the target band, but there have been welcome downward moves in inflation expectations from the third quarter to fourth quarter.”
Headline CPI annual inflation rate in December 2014 was 5.3%. This rate was 0.5 of a percentage point lower than the corresponding annual rate of 5.8% in November 2014, said Nkosi. “On average, prices decreased by 0.2% between November 2014 and December 2014.”
The drop in the inflation rate in December is due in large part to the lower petrol price which fell from R12.98 per litre to R12.29 per litre, he said.
“The transport index decreased by 1.6% between November 2014 and December 2014, mainly due to a 69c/litre decrease in the price of petrol,” said Nkosi. “The annual rate decreased to 1.7% in December 2014 from 4.2% in November 2014.”
The CPI inflation rate averaged 6.1% y/y in 2014, up from 5.8% in 2013 and it’s expected to slow in 2015 and average 3.6% for the year according to Standard Bank Economics Research. However, the extent of the slowdown will be dependent on the oil price.
The Sarb decreased its 2015 CPI forecast from 5.3% to 3.8%, while also lowering all of its growth and core inflation forecasts, said Standard Bank.
“The retail price of 95 grade petrol will drop by 93 cents per litre from the fourth of February 2015 while the price of diesel would decrease by R1.02 cents a litre. The decrease in the price is due to a decline in lower international crude prices.”
