Despite this significant political progress, June was another unsettled month for South Africa, with the delayed announcement of the GNU’s cabinet impacting local business confidence and consumer decision-making regarding major purchases.
This sentiment was reflected in the latest vehicle sales statistics released by naamsa | The Automotive Business Council today, showing a further slowdown in vehicle sales.
Overall, the market fell by 14% to 40,072 units compared to June 2023. However, there was some positive news as built-up vehicle exports rose by 3.6%. Out of the total reported industry sales, an estimated 33,039 units, or 82.5%, represented dealer sales.
The light commercial vehicle segment was hit hardest, with sales down 24.3%. Medium truck sales dropped 27.7%, and the heavy truck and bus segment was 11.7% lower. Passenger car sales were also down by 9% compared to the same month last year, despite strong rental sales making up 14.2% of car sales and 11% of the total market. Dealers accounted for 82.5% of total market sales, with 3.6% going to government and 2.9% to corporate fleets.
“It is tough out there. The few green shoots we saw after the elections dried up due to the time it took to appoint the cabinet. The taxi market is slowly starting to recover, as sales over the past few months dropped from around 1,400 per month to almost zero. This decline is due to banks being risk-averse in this sector. This cautious approach has extended across the industry, with approval rates remaining under pressure.
“Additionally, the trend of approved loans not being taken up by consumers has increased, reflecting a lack of confidence in the market,” Cohen explained.
In the heavy vehicle space, banks are also reluctant to finance heavy vehicles, and most of the bigger operators are not purchasing at all. Conversely, the used vehicle market continues to show an increase in demand, with a definite trend of buying down – negatively influencing new vehicle sales.
“We will have to wait a while to gauge the effect of the new government, but there have been several positives of late which will help boost the economy,” added Cohen. “These include more than three months of no load shedding, with another 800MW being added to the grid from the Kusile power station last week. Additionally, the Rand has recovered against the dollar, now hovering between R17.90 and R18.20, compared to over R19 when the election results were announced. This recovery bodes well for inflation, which remains sticky and has needed good news in the market.”
Standard Bank South Africa is predicting up to two rate cuts in the remainder of 2024, which, if it happens, will be immensely positive to encourage growth and stimulate consumer spending.
“Dealers are the face of the industry and deal with the consumer directly, so we have a unique understanding of the financial pressures consumers are under and the issues they face. We do still have our ongoing longer-term battles like crime, corruption, as well as utility supply constraints, but all signs are pointing towards a brighter second half of the year for consumers and dealers alike,” concluded Cohen.
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