Wheels of fortune turn for SA’s new vehicle sales
Years of decline coming to end
SOUTH Africa’s automotive sector, the country’s largest manufacturing industry, expects a slight increase in new vehicles sales this year as economic growth gains pace, thanks to commodity price rises and a recovery in farming.
New vehicle sales were expected to rise between 2.5 percent and 3.5 percent this year, said Nico Vermeulen, the director of the National Association of Automobile Manufacturers of South Africa.
The increase follows three successive years of decline and a drop of 11.4 percent last year to 547 442 units.
“As the economy starts to show signs of life and interest rates remain stable for the foreseeable future, the market will develop some traction in the second half of the year,” Vermeulen said.
He said the industry’s sales growth projections were based on an assumption of economic growth of at least 1 percent this year in Africa’s most industrialised economy.
In October, the Treasury forecast growth of 0.5 percent last year, accelerating to 1.3 percent this year.
Export success
The country is recovering from its worst drought in history, which wilted crops and stoked food inflation. Slower inflation will help the economy this year along with higher commodity prices, although worries about low investment rates and the political environment continue to weigh. Despite the recent fall in domestic new car sales, exports have improved, hitting a record of 344 822 units last year and are expected to rise to 375 000 units this year.
Most South African car manufacturing is of foreign models made under licence.
Vermeulen said Europe would remain the key export market, however, manufacturers were also closely watching developments in the US, where president-elect Donald Trump has vowed to hit companies that shift production from America to other countries with a 35 percent tax on their exports into the US.
“It’s premature to speculate about what will happen. Our reading of the situation is Trump’s comments were directed at Mexico. I don’t think he was directing them at other countries,” Vermeulen said.
He said South African manufacturers have benefited from the African Growth and Opportunity Act (Agoa), a US trade agreement designed to help African exporters with duty-free access to goods from sub-Saharan African countries.
“We need to allow the new US administration to settle in and then clarify what their trade policy will be,” Vermeulen said.
“Agoa is a developmental programme intended to support growth and development of African economies… I hope that it will not be changed.” – Reuters
11.4% Last year’s decline in sales of new vehicles in South Africa