South African new vehicle sales continued to decline in October, according to the latest consolidated sales data from the National Association of Automobile Manufacturers of South Africa (Naamsa). Industry sales totaled 54 244 vehicles, representing an 8.6% year-on-year decline, with the biggest decreases seen in sales through the government and rental channels.
Government channel sales declined a massive 25.7%, year-on-year. Similarly, sales to the rental market saw a sharp drop of 23.8% compared to October 2014. However, sales through the dealer channel, which accounts for consumer sales, only declined 2% over the same period.
Total passenger car sales saw a year-on-year decline of 10.9%, with 36 175 vehicles sold. October saw 15 171 sales of light commercial vehicles (LCVs), a market decline 4.1%. Despite this, LCV sales through the dealer channel grew 1.5%, year-on-year.
“The current macro-economic headwinds are mirrored in this sales decline. With prevailing low confidence levels, corporates are not spending money acquiring new or replacement assets, choosing instead to hold onto their capital,” said Simphiwe Nghona, CEO of Motor Division at WesBank. “With a forecast of subdued growth in the GDP, coupled with various other economic factors, we don’t expect sales to improve.”
Despite the drop in sales in the government and rental markets, both dealer sales and WesBank’s application data indicate that there remains strong demand for new vehicles among consumers. In line with the smaller sales declines through the dealer channel, record numbers of finance applications were received in October. Finance applications for new vehicles grew 7.5%, year-on-year.
With a strong demand for new vehicle finance the decline in new vehicle sales points to deteriorating credit profiles. With high levels of household debt and new lending rules that are more stringent, fewer consumers are qualifying for vehicle finance. Additionally, household budgets have been under pressure throughout the year, on the back of a depreciating Rand, fluctuating fuel prices, interest rate hikes and all the associated increases in living costs.
“When budgeting for a new vehicle purchase consumers should also consider associated costs, to ensure they are approved for finance. These costs include insurance premiums, petrol, license fees and vehicle maintenance,” said Nghona. “Buyers can also structure their finance contracts to improve affordability. Longer contract terms can make instalments more affordable, and paying a large deposit will also be very beneficial.”
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