Car sales better than expected
NEW car and light commercial vehicle sales achieved encouraging positive growth last month. However, sales of medium and heavy commercial vehicles declined in line with the economic downturn.
Azar Jammine, the chief economist at Econometrix, said the new passenger vehicle sales figures for last month were better than expected and reasonably encouraging from a consumer spending perspective.
Figures released yesterday revealed cumulatively new vehicle sales increased last month by 4.1 percent, which is 46 719 units as compared to the 44 870 vehicles sold in July last year.
Sales of new cars improved year-on-year by 6.2 percent to 30 826 units and light commercial vehicles, bakkies and mini buses by 1.7 percent to 13 774 units.
Nico Vermeulen, the director of the National Association of Automobile Manufacturers of South Africa (Naamsa), said the vehicle rental industry last month accounted for an estimated 18.2 percent of new car sales, but its share was understated because it excluded data for a number of automotive companies.
Jammine said new car sales last month were being compared with very low sales base in July last year but Econometrix had been expecting lower sales growth.
He said the recent decrease in interest rates would have assisted new vehicle sales in the past 10 days because it would have reduced fears among car buyers that they might be caught off guard by a rise in interest rates.
Sales of medium commercial vehicles dropped by 16.1 percent to 598 units and heavy truck and bus sales by 3.7 percent to 1 521 units.
Jammine said overall the new vehicle sales once again confirmed that the economy was not collapsing although it was clearly weak, as indicated by the reduction in commercial vehicles sales.
This was linked to a loss in confidence and businesses cutting back on their capital investment, he said.
Kamilla Kaplan, an economist at Investec, said the new vehicle sales outcome was in line with the evidence derived from the Bureau for Economic Research (BER) second quarter retail survey, which showed that new vehicle traders were cautiously optimistic that conditions might improve in the third quarter or that the rate of contraction in sales volumes would ease.
Kaplan said the medium commercial vehicle segment was often associated with the wholesale and retail market and the under performance and 16.1 percent year-on-year contraction in sales suggested there was little expectation of a meaningful increase in consumer spending or in general business activity in coming months.
She said the fourth consecutive month of contraction in heavy commercial vehicle sales suggested there was weak investment demand.
Kaplan added that year-onyear new vehicle sales could improve further in coming months after three consecutive years of contraction because of low statistical base factors.
However, Kaplan said the underlying performance of vehicle sales was expected to remain relatively subdued in line with only a modest lift in GDP growth in the region of 0.5 this year from 0.3 percent last year.
Rudolf Mahoney, the head of brand and communications at WesBank, said the performance of the new vehicle market last month could be attributed to positive changes in the underlying fundamentals in the market.
Mahoney said WesBank saw this in their data, where the demand for new vehicle finance increased 9 percent in the past month.
He attributed this improvement to the steady decline in household debt levels over the past 24 months, a marginal increase in the disposable incomes of households and a decline in new vehicle price inflation.
“Combined, these factors will be conducive to new vehicle sales and positive consumer sentiment,” he added.