Car sales rise as buyers beat VAT hike

Pre-emptive purchases of new vehicles in March to beat the April 1 increase in value-added tax (VAT) and vehicle advalorem duties would not influence the overall market and would inevitably be followed by a market “correction”, says WesBank sales and marketing head Ghana Msibi.

Pre-emptive purchases of new vehicles in March to beat the April 1 increase in value-added tax (VAT) and vehicle ad valorem duties would not influence the market and would inevitably be followed by a market “correction”, says WesBank sales and marketing head Ghana Msibi.

But he said growing demand from private consumers, encouraged by price restraint and lower interest rates, would allow the full-year market to show a slight hike over 2017.

This week’s VAT increase from 14% to 15% and the imposition of a 5% duty on imported luxury vehicles persuaded some consumers and fleet owners to buy early and avoid the extra costs. The National Association of Automobile Manufacturers of SA (Naamsa) said this was a significant contributor to the newvehicle market growing by 1.1% in March from a year earlier, from 48,698 to 49,233.

It was the first rise in 2018, after declines in January and February. The association said the market for 2018 could grow by up to 3% from 2017’s 557,586 vehicles sold.

Msibi, however, said WesBank believed growth would be only about 0.75%. Pre-emptive buying simply advanced sales; people buying in March took themselves out of the picture in coming months. “We see the market self-correcting,” he said.

Nevertheless, he said prospects for consumer sales were promising. A 15% reduction in direct orders by car rental companies so far in 2018 had been mostly cancelled out by a 3% rise in dealer sales, mainly from private consumers.

“There is a traditional correlation between a strong rand and lower interest rates, and consumer demand,” Msibi said. “Both these levers are very positive.” The Reserve Bank recently reduced the repo rate and the rand has bounced back against foreign currencies.

While the total new-vehicle market for the first three months of 2018 was down by 4.1% — from 147,285 to 141,272 — Msibi was confident of a small gain by year-end. New-car sales grew 3.7% in March, from 31,032 to 32,176, from the corresponding month in 2017. Commercial vehicles continued to lose ground. Light commercials — mainly bakkies and minibuses — fell by 2.3%, medium commercial trucks by 14.6% and heavy trucks and buses 7.9%.

Vehicle exports declined in March, due mainly to the suspension of manufacturing at BMW SA while the company switched production from the 3-Series car range to the X3 sports utility vehicle. Commercial production of the latter is expected to start soon.

BMW SA MD Tim Abbott said he expected the company to make up the shortfall in coming months and achieve record production in 2018.