Share

Driving motorists away from the new car market

There is good reason for the decrease in new car sales and the concomitant increase in used car sales. And none of them are pretty.

Stagnant economic growth, political uncertainty, and the prospect of an economic downgrade are hitting consumers’ back pockets. Currency flip-flops, rising inflation and the domino effect that these all have on new vehicle price increases are also not aiding the depressed new car market.

“It is pretty clear that the consumer is taking enormous financial strain,” says Simphiwe Nghona, CEO of motor division at WesBank.

That strain is evidenced not only by falling new car sales but also by the number of vehicle financing deals.

Nghona tells finweek that while WesBank’s new vehicle finance applications were down a whopping 15.3% to end October 2016, applications for used vehicles were up 3.4%, an all time record. In October the average new car financed was 12.7% more expensive than a year ago, says Nghona.

And what of defaulting consumers? Nghona says that collection and repossession activity has risen but not at the alarming levels seen in 2008/9. 

“All our collection and repossession activity and numbers of customers in default are well within management expectation given the deterioration in the economy,” he says.

Year-on-year the market has declined 10.1% with much of that decline attributed to passenger cars, the largest portion of the new car market, down by 9.5%.

It is not all doom and gloom however. 

October’s figures were an improvement of 2.9% over those of September, both passenger car and light commercial vehicle (LCV) figures up by 2.5% and 5.3% respectively. 

But Nghona cautions about reading too much into those slight increases, saying it is not an indication of any form of recovery.

Exports too have grown 10.8% and rental sales rose 31.6% year-on-year but that latter healthy contribution arises from the car rental industry de-fleeting at the end of October.

Nonetheless, figures are sobering, the declining new car sales also fuelled by rising new car prices impacting consumer affordability that accelerates the already strong demand for used cars. 

Changing consumer mobility patterns, which motorists opting instead for the Gautrain, Uber and car sharing, among others, are also disrupting the need for car ownership and putting the brakes on new vehicle sales. 

The glum scenario has the potential to be exacerbated by the country’s possible downgrading, which if this transpires, will have an adverse effect on consumer buying patterns, especially where vehicles are concerned. 

In event of a downgrade, the cost of funding from a banking perspective will also be more expensive for the end consumer, says Nghona.

South Africa’s new vehicle sales market remains sobering, with year-to-date sales in decline since the beginning of 2016, the market down 11.2%.

WesBank predicted in March that new car sales would drop by 12% for 2016. They are not that far off with just two months to go.

Should the country avoid a downgrade WesBank believes it will restore business and consumer confidence and this says Nghona will hopefully stimulate the automotive sector.

So when can we expect a recovery in the new car market?

“Not anytime soon,” is Nghona’s view, a firm prediction dependent on a number of factors that come into play including the rand/dollar exchange rate.

While a more accurate prediction from WesBank is expected by March 2017, in essence this equates to a depressed market next year and into 2018.

Double-digit new vehicle price inflation, pressure on household disposable incomes, low levels of business confidence and relatively high interest rates will continue to impact negatively on new vehicle sales. Domestically, the short to medium term outlook remains extremely challenging, says the National Association of Automobile Manufacturers of South Africa (Naamsa).

Still, those investing in a new car will find many good deals floating around, manufacturers putting their weight behind aggressive pricing that often include options, as well as flexible financing.

But if that new car happens to be on the shopping list, don’t delay. Car prices are likely to rise in January.

Snapshot

Year-to-date, the industry is down 11.2%, with sales of 459 486 new vehicles, compared to 517 152 sold for the same period last year.

October 2016 new vehicle sales

48 745 units
(54 239 October 2015)

Year-on-year sales

Total sales: Down 10.13%
Passenger cars: Down 9.5%
Light commercial vehicles (LCV): Down 10.69%
Medium commercial vehicles: Down 26.7%
Heavy commercial vehicles: Down 9.2%.

Sales by channel (y-o-y)

Dealer sales: Down 13.8%
Rental car sales: Up 31.6%
Exports: Up 10.8%

Month-on-month sales

Total sales: Up 2.9%
Passenger vehicles: Up 2.5%
LCV vehicles: Up 5.3%
Medium commercial vehicles: Down 10.6%
Heavy commercial vehicles: Down 1.1%
Dealer sales: Flat at 0.86%

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.93
-0.1%
Rand - Pound
23.90
-0.0%
Rand - Euro
20.44
+0.1%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.1%
Platinum
904.58
+0.9%
Palladium
1,012.82
+1.1%
Gold
2,218.03
+1.1%
Silver
24.80
+0.7%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.9%
Resource 10
57,251
+2.9%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders