Public holidays and tight economic climate cut new car sales 10%

NEW VEHICLE sales fell 10.7 percent year on year in April, according to data released by the Department of Trade and Industry on Friday.

A total of 46 013 new vehicles were sold, a substantial decline of 5 485 from April last year.

The National Association of Automobile Manufacturers of SA (Naamsa) said that in addition to the difficult economic environment, there were more public holidays this year than last April. The result was fewer days for trading and industry production, which had a substantial effect on domestic sales and vehicle exports.

Export sales of 16 801 units reflected a pronounced decline of 8 142 vehicles, or a fall of 32.6 percent, from exports in April last year.

Naamsa said prospects for domestic sales over the rest of the year would be affected by subdued economic growth, above-inflation vehicle price increases as a result of unfavourable exchange rates and further upward pressure on interest rates.

“Consumer sentiment remained under pressure due to high level of indebtedness, escalating energy and transport costs and, in Gauteng, e-tolling. These factors would influence consumer demand, principally in the case of the new car market.”

Domestic trading conditions were expected to remain difficult, with pressure on margins, particularly in the new car and light commercial vehicle sectors.

As a result of the challenging macro-economic environment, Naamsa expected that the 2014 domestic market was likely to register a decline, in average terms, of about 3.5 percent compared with 2013.

It said that with the contribution of Mercedes-Benz CClass exports kicking in from July, industry vehicle exports were expected to recover during the second half of the year, particularly in respect of exports to Asia, Africa and Europe. Vehicle exports were well positioned to benefit from any improvement in global economic conditions.

WesBank, a leading provider of vehicle finance and car insurance, said the slump in vehicle sales was in line with its outlook for the market, which forecast a shift from new to used vehicles, driven by aggressive increases in new car prices.

It said TransUnion Auto reported an increase in new car prices of 6.58 percent against a 0.83 percent increase in used car prices.

Rudolf Mahoney, the head of research at WesBank, said: “The outlook shows that the new car market will remain depressed. There will be significant growth in the used car market.”

The Nedbank Economic Unit said the outlook for vehicle sales in 2014 had dimmed. A weak rand, higher inflation and rising interest rates against the backdrop of weak consumer confidence would dampen demand for new vehicles, notably passenger vehicles.