New-car sales crash in a month of oddities

New-vehicle sales plunged to their lowest monthly level in more than seven years in April on a combination of economic uncertainty and a crippling public holiday timetable that slashed the number of selling days.

If the scale of the fall was surprising, the decline itself was not. SA’s credit downgrades to junk status and unpopular cabinet appointments by President Jacob Zuma caused analysts to reverse their predictions that the market was ready to recover after three years of decline.

WesBank analyst Rudolf Mahoney said April’s sales were the lowest monthly sales since December 2009. Consumers were already bracing themselves for more bad news.

Holiday-related production cutbacks contributed to a 25.5% drop in exports. A prime reason, however, was Volkswagen SA starting the gradual production rundown of its Polo, which would be replaced by a new range at the end of 2017.

The company exported 3,817 cars in April, barely half the 7,594 shipped in March. Toyota SA’s export numbers were also

cut. “The drop is demand driven. The overall downturn in the African economy has resulted in low demand,” a spokesman said.

Overall, South African motor companies exported 24,449 vehicles in April compared with 32,832 in April 2016. Figures released on Tuesday by the Department of Trade and Industry show that domestic sales of new vehicles totalled 34,978 in April, down from 40,348 in the corresponding month of 2016. Car sales fell 13.6% to 22,462; light commercial vehicles 13.2%, to 10,604; medium-sized trucks 3.8%, to 562; heavies 15.5%, to 328; and extra-heavies 8.4% to 664. For the first four months of 2017, the new-vehicle market fell 1.4% to 181,921. Cars were down 2.2% at 121,686.

Mahoney said the proportion of new-car buyers who opted for fixed-interest finance to counter expected interest-rate rises rose to 56.4%, from 50% a year ago. Buyers were also moving in greater numbers to “balloon” finance deals to minimise immediate costs.

“Buyers are being very conservative,” he said. “They are hedging their bets.”

The good news for those with access to finance, he said, was that motor companies’ desperation to sell vehicles was creating “insane” sales incentives. For example, a leading manufacturer slashed R115,000 off the price of one of its bakkies.

“There are ridiculous deals to be had,” Mahoney said.

With no more holiday disruptions in the month, he said May would offer a truer picture than April of the state of the market after the downgrade.

The National Association of Automobile Manufacturers of SA, which suspended market forecasts in April because of SA’s poor economic outlook, said: “We anticipate greater clarity will be forthcoming over the next two to three months.”