South Africa’s automotive industry has pinned hopes of recovery on the beginning of the interest rates cutting cycle after new vehicle sales experienced another modest decline of 4.1% and exports plunged by 38.1% in September.
According to the Automotive Business Council (Naamsa) yesterday, vehicle sales in South Africa continued their downward trend in September, with total sales of 44 081 units, slightly down from the same period last year.
However, there was a modest increase in passenger car sales, offering hope that the market may be slowly turning.
The South African Reserve Bank made the much-anticipated decision to cut interest rates by 0.25% during September, the first of what consumers and economists alike hope is the start of a cutting cycle over the next 18 months.
Naamsa CEO Mikel Mabasa said South Africa’s automotive industry remains optimistic that the tide for higher new vehicle sales will turn and show some signs of recovery as we move closer to year end, despite the lingering effects of a high inflationary environment.
“We stated that we anticipate a year of two halves, with a taxing first six months of the year and improved prospects for the second half of the year. All the economic challenges of 2023 rolled over into 2024, such as the high interest rate and inflation environment, a weaker rand exchange rate, high fuel prices, port delays, and indebted consumers, along with a vehicle affordability crisis,” Mabasa said.
“Our predictions and overall outlook for this year played out exactly as we suspected for the first half of the year. We have seen some positive movements during the third quarter but both new vehicle sales and vehicle imports for the first nine months of the year were still 6% and 3%, respectively, below the 2023 levels.”
In a year marked by economic fluctuations, year-to-date data reveals that new vehicle sales in South Africa reached 401 169 units by September 2024, reflecting a decline of 5.8% compared to the same period in 2023.
Similarly, exports fell to 289,198 units, showing a significant drop of 19.7%.
Naamsa said a key factor in this export decline was the waning demand for models nearing the end of their production cycles, compounded by stricter environmental regulations in key global markets.
These combined pressures have tempered growth in an industry poised for recovery amid shifting dynamics.
Lebo Gaoaketse, head of marketing and communication at WesBank, said the September market performed at similar volumes to those experienced in the beginning of the year and where the market was towards the end of 2019, showing that the slow recovery continues.
Gaoaketse said that with the expectation of stimulated trading conditions over the next 18 months, the new vehicle market can be expected to perform better as consumers slowly reap the rewards of debt savings.
“Cumulatively these cuts will begin to impact indebted consumers over time and provide some level of relief in expensive debt,” Gaoaketse said.
“However, the immediate effects are practically small; but philosophically provide a stimulus to the market in sentiment.”
Despite the poor performance on paper, new vehicle volumes for September were the third-best sales month for the year and were only 148 units behind the positive volume growth in July that had everyone excited
On the commercial vehicle front, the market continues to face pressure, with light commercial vehicle sales down 17.1% in September. The medium truck segment remained stable, while heavy trucks and buses experienced a significant 18.1% decline. However, compared to August, unit sales saw slight increases across all segments except for extra-heavy vehicles.
The passenger car market continued to bolster sales, up 2% to 30 218 units, once again breaching the 30 000-unit volume and surpassing 250 000 units (252 093) year-to-date.
Brandon Cohen, national chairperson of the National Automobile Dealers Association (NADA), said passenger car sales were a key indicator of consumer sentiment, and the positive growth in this segment for the second consecutive month was encouraging.
Cohen said while the SARBs first interest rate cut in four years will take time to fully impact the market, the industry was already seeing other positive factors, including a stronger exchange rate, lower inflation, a positive 100-day performance by the Government of National Unity, increased foreign investment, 190 days without load shedding, and lower fuel prices. These are all promising signs.
“Despite these green shoots, the economic environment remains challenging, with rising electricity prices expected to put further pressure on disposable income. However, the industry remains cautiously optimistic about potential improvements in the fourth quarter, driven by the introduction of new models, additional brands in the lower price segments, and aggressive dealer incentives,” Cohen noted.
“We are not out of the woods yet, but the data is showing positive signs in the domestic market, and sentiment continues to improve. This momentum will hopefully translate into stronger sales in the medium to long term.”
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