NEW VE­HI­CLE SALES

Car sales show a re­mark­able re­silience

The Star Early Edition - - BUSINESS REPORT - Roy Cokayne

NEW CAR sales were sur­pris­ingly re­silient last month, de­clin­ing by only 2.5 per­cent to 26 317 units, com­pared to the 26 980 cars sold in May last year.

Sales of new light com­mer­cial ve­hi­cles, bakkies and mini buses dropped by 1.5 per­cent to 13 410 from 13 620 in the same pe­riod.

Azar Jam­mine, the chief econ­o­mist at Econometrix, said yes­ter­day that new car sales were amaz­ingly good and in­di­cated the econ­omy was not as weak as was ex­pected.

Jam­mine said the stronger than ex­pected new ve­hi­cle sales also co­in­cided with the im­prove­ment in busi­ness con­di­tions in­di­cated by the in­crease in the pur­chas­ing man­agers in­dex last month.

He said the per­for­mance of new ve­hi­cle sales last month also fit­ted into the nar­ra­tive that the econ­omy was bot­tom­ing out and in­fla­tion fall­ing more than ex­pected, an ab­sence of in­ter­est rate hikes and an im­prove­ment in con­sumer credit health.

“Ve­hi­cle sales fig­ures have al­ready taken a huge knock and they change in line with the rate of change in the econ­omy. The econ­omy is weak, but the rate of change is im­prov­ing,” he said.

Kamilla Ka­plan, an econ­o­mist at In­vestec, said the de­crease in new ve­hi­cle sales in the first five months of this

‘Ve­hi­cle sales fig­ures have al­ready taken a huge knock and they change in line with the rate of change in the econ­omy.’

year amounted to 1.7 per­cent year-on-year and ex­tended the 11.4 per­cent con­trac­tion last year. Ka­plan said low sta­tis­ti­cal base fac­tors could see the yearon-year sales out­comes im­prove go­ing for­ward fol­low­ing three con­sec­u­tive years of con­trac­tions.

How­ever, Ka­plan said that the un­der­ly­ing per­for­mance in the new ve­hi­cle sec­tor was ex­pected to re­main rel­a­tively sub­dued in line with only a modest ex­pected re­cov­ery in gross do­mes­tic prod­uct growth of about 0.8 per­cent this year from 0.3 per­cent year-on-year last year.

Sales of medium com­mer­cial ve­hi­cles dropped last month by 13.6 per­cent yearon-year to 583 units and heavy truck and buses by 10 per­cent to 1 473 units. Ex­ports of lo­cally pro­duced ve­hi­cles de­clined last month by 12 per­cent to 29 596 units from the 33 619 units ex­ported in May last year.

Nico Ver­meulen, a di­rec­tor of the Na­tional As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers of South Africa (Naamsa), said the fairly sub­stan­tial year-on-year de­cline in new ve­hi­cle ex­ports should be seen in the con­text of the fact that ve­hi­cle ex­ports in May last year rep­re­sented the sec­ond high­est ex­port num­ber on record.

Ver­meulen said that fol­low­ing the modest im­prove­ment in new ve­hi­cle sales dur­ing the first three months of this year, the out­look for the bal­ance of the year was some­what un­cer­tain. “The cur­rent po­larised po­lit­i­cal en­vi­ron­ment in South Africa, to­gether with prospects of sub­dued eco­nomic growth over the short to medium term, con­tin­ued to weigh on busi­ness con­fi­dence and con­sumer sen­ti­ment,” he said.

Ru­dolf Ma­honey, the head of brand and com­mu­ni­ca­tions for WesBank, said over­all sales de­clined, de­spite there be­ing four more work­ing days last month than in April and one more work­ing day than in May last year.

Ma­honey said they could only at­tribute this de­cline to un­cer­tainty among buy­ers.

Two in­di­ca­tors of this un­cer­tainty among con­sumers in WesBank’s data were yearon-year in­creases for av­er­age deal du­ra­tion in both the new and used mar­ket, which showed that con­sumers were hes­i­tant to re­place their ve­hi­cles, and the in­crease in con­sumers choos­ing to man­age risk by opt­ing for fixed in­ter­est rates.

“Data from WesBank shows a 19 per­cent in­crease in de­mand for fixed in­ter­est since South Africa’s econ­omy was down­graded to junk sta­tus,” he said.

PHOTO: SIM­PHIWE MBOKAZI

There was a modest im­prove­ment in new ve­hi­cle sales dur­ing the first three months of this year, Naamsa says.

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