Petrol prices and interest rates likely to inhibit new vehicle sales
VEHICLE sales kicked off to a good start in January, but rising fuel prices, along with a host of challenges outside the auto industry’s control, may dampen sales later this year.
Naamsa, the Automotive Business Council remarked this week that fuel price hikes – petrol prices increased to above R20 a litre on Wednesday – and a higher interest rate did not appear to deter people from buying cars in January 2022.
January new vehicle sales increased 19.5 percent to 41 382 units compared with January 2021, creating “a solid start to the year and the market’s continued recovery”, Naamsa said.
Naamsa executive manager Dr Norman Lamprecht said in an interview that a high fuel price affects the motor industry in a number of ways.
In 2021, some 33.7 percent of vehicles on the road were diesel, a high percentage in global terms.
This was due not only to the popularity of bakkies in this country, but was also an indication that consumers were aware that diesel vehicles were claimed to be more fuel efficient than petrol engine vehicles, while diesel prices have generally been lower than petrol prices.
He said the rising fuel price was also a major contributor to the buying down trend seen in the industry over the past 7 years at least, as consumers wished to buy more fuel-efficient, smaller vehicles.
However, Dr Lamprecht said by far the biggest impact of the fuel price was its contribution to overall transport costs, which causes inflation to rise and subsequently, also interest rates, as had been the case for last week’s 25 basis point interest rate increase announced by the Reserve Bank’s Monetary Policy Committee.
Rising costs and higher interest rates typically constrain the economy and means consumers have less to spend on new vehicles, he said.
The impact of the weaker economy in recent years on driving habits (not counting the Covid 19 pandemic year) can be indicated by the volume of
petrol sold.
South African Petroleum Industry Association statistics show some 10.77 million litres of petrol were sold in 2019, compared with 11.32 million litres in 2009, a 4.8 percent decline, where one might ordinarily have assumed people used their petrol cars more in 2019 than they would have ten years before.
The price of 95 octane petrol in Gauteng on June 30, 2009, was R7.80 per litre, and this had increased by 112.4 percent to R16.57 per litre on June 30, 2019.
On Wednesday, the price was R20.14 per litre, while the price of 0.05 percent diesel is about R18.04 a litre.
Wesbank head of marketing Lebogang Gaoaketse said consumers were facing rising costs and more steadily recovering earnings in 2022, which was putting pressure on household earnings and the ability to afford new vehicles.
However, price inflation in the preowned market and necessary replacement cycles some two years after the onset of the pandemic should fuel demand for new vehicles this year, he said.
The National Automobile Dealers’ Association (Nasa) said in response to Business Report questions that projected fuel prices and interest rate hikes make for a bleak outlook, and would definitely have an adverse effect on all sectors of the economy – especially on new vehicle sales and others that are not considered basic necessities.
“Nasa suspects volume brands will be more affected than premium ones, as trends have shown luxury brands have withstood economic pressures better over the past two years,” the association said.
Nasa said Covid-19 vaccine drives, and plans to return to office working arrangements were likely to stimulate passenger and commercial vehicle sales this year.