Weak, but could be worse
Tough economic conditions are hurting new-vehicle sales
● When South African newvehicle sales hit a record high of 714,340 in 2006, it was supposed to be the springboard to greater things. Some optimists forecast a market of 1-million within five years.
Seventeen years later, the actual market is barely half that. In 2022, sales of new cars and commercial vehicles totalled 529,562. For the first nine months of 2023, the market was 401,305. That was 2.5% more than the 391,500 at the same stage last year. That yearon-year gap is notably smaller than it was a couple of months ago and may shrink further before the year is out.
Car sales are actually down 3.6% on 2022, from 270,540 to 260,833. The saving grace for the overall market is light commercial vehicles (LCV) — bakkies and minibus taxis — which are up 17.2%, from 99,013 to 116,002. Don’t read too much into that. Midyear LCV sales in 2022 were badly affected by the four-month closure of Toyota’s flood-ravaged Durban assembly plant, so the scale of this year’s improvement is misleading.
Statistically, the extraheavy truck sector is the big winner so far this year, up 23.4% from 11,151 to 13,760. That’s partly because of growing demand for road transport as Transnet’s rail services sink deeper into the mire. Sales of heavy trucks are down 8% but mediumsized vehicles have improved by 4.1%.
Billy Tom, president of industry association
Naamsa, says full-year sales are likely to return to pre-Covid levels this year. In 2019, the market was 536,612 before collapsing to 380,206 in the first year of the pandemic.
When looking for reasons for the weak market, it’s hard to know where to start. Rising interest rates, load-shedding, economic slowdown, crumbling consumer and business confidence, increasing household debt, inflation, a weak rand, volatile commodity prices, and ever-increasing fuel prices have all played a part. So has the Russia-Ukraine war which, with other international events, has disrupted global energy and supply chains.
Take all that into account, say analysts, and the South African new-vehicle market is actually doing better than might be expected. The word “resilient” keeps cropping up. Banks report that demand remains strong, even if many of those applying for finance don’t qualify.
The shift towards cheaper new vehicles continues. The premium-car market has shrunk considerably in recent years. BMW South Africa CEO Peter van Binsbergen is confident it will recover, though whether it will be to historical levels, is doubtful.
Increasingly, imported cars are taking a growing slice of sales. In 2022, 323,800 new cars and bakkies were imported into South Africa, from 23 countries. They accounted for a combined 64.8% of all domestic sales across the two categories: 80% of cars and 23.5% of bakkies. India, where many multinational companies have set up assembly plants, produced more than 50% of new vehicles imported into South Africa but only 27.3% of total values, reinforcing its status as a source of affordable vehicles.
Toyota and Volkswagen continue to lead the new-car market but Suzuki has joined, and indeed overtaken, the likes of Hyundai, Kia and Renault as major competitors. Chinese brands such as Haval and Chery are also making big strides.
In truck markets, stalwarts such as Daimler, Scania, UD, Isuzu, MAN and Volvo remain key players. But here, too, there is a growing Chinese presence, in the shape of FAW.