Drop in rental vehicle purchases dents car sales

NEW VEHICLE sales dropped a marginal 0.4 percent to 31 200 units last month from the 31 323 units sold in February last year as a result of contraction in the car rental industry.

Nico Vermeulen, the director of the National Association of Automobile Manufacturers of South Africa (Naamsa), said the rental industry’s contribution had declined due to seasonal factors but still accounted for about 13.9 percent of new car sales last month.

Sales of new light commercial vehicles, bakkies and minibuses slumped last month by 9.6 percent year-on-year to 13 212 units, medium commercial vehicles by 13.4 percent to 574 units and heavy trucks and buses by 14.6 percent to 1 361 units.

Dr Azar Jammine, the chief economist at Econometrix, said statistical factors were largely responsible for the decline in sales of commercial vehicles.

Jammine said month-onmonth, medium commercial vehicles sales had increased in February last year by 44.2 percent, heavy commercial vehicles over 16.5 tons by 59.1 percent and extra-heavy commercial vehicles by 51.6 percent.

By contrast, almost the same number of new car sales was sold in February last year compared to last month.

This was despite the vehicle rental industry accounting for only 13.9 percent of new car sales when its contribution in some months accounted for more than 20 percent of new car sales, he said.

However, Jammine said the overall new vehicles sales figures did to some extent provide a warning sign that “Ramaphoria” – the increased optimism and improvement in business and consumer sentiment following the election of Cyril Ramaphosa as president – was being overdone.

“There will be a reality check in a few months’ time when people realise he still has to deal with the public service wage negotiations, opposition to the increase in VAT and land reform pressures.”

Jammine added that there was a big pre-emptive buying spurt in new cars in October and November last year because the value of the rand was plummeting and consumers were anticipating large price increases in the new year.

Rudolf Mahoney, the head of brand and communications at WesBank, said that despite the new car market being down, dealer channel sales were up by 2.9 percent – in line with its 12 percent growth forecast in new car finance applications.

Mahoney said the rental industry had pulled sales down.

“Rental industry sales are down 29.9 percent for February and 32 percent for January and February combined. In January and February last year, the rental channel was up by 32 percent, so sales last month are being compared to an unnaturally high base,” he said.

Mahoney said consumer demand was very positive and he expected it to stay at these levels.

Lara Hodes, an economist at Investec, said the contraction in both medium and heavy commercial vehicles was reflective of relatively weak rates of fixed investment expenditure.

Hodes added that with South Africa on a more positive growth trajectory, and barring a further credit rating downgrade, an improvement in economic growth was forecast, which would lend support to new vehicle sales.