Wheels of for­tune turn for SA’s new ve­hi­cle sales

Years of de­cline com­ing to end

The Star Early Edition - - BUSINESS NEWS - Olivia Kumwenda-Mtambo

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


Deal­ers could be smil­ing and car show­rooms a lot busier with an an­tic­i­pated rise in the sale of new ve­hi­cles this year. Naamsa fig­ures show the sec­tor may be poised bet­ter things after lan­guish­ing three years in the dol­drums.

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