New car sales reflect economic insecurity
Simphiwe Nghona, the executive head for motor retail at Wesbank, talking to ANA about new car sales figures released by the National Association of Automobile Manufacturers of Southern Africa (Naamsa) on Wednesday, said car rental companies and other businesses were holding back on renewing their fleets because of economic uncertainty.
Naamsa, citing figures from the Department of Trade and Industry, said total new car sales fell from 52 785 in June last year to 50 251 last month, a decline of 4,8 percent. Passenger vehicles sales fell by 6,6 percetn. Nghona said this decline was partly due to purchases by the car rental industry falling by 19 percent because operators were holding on to vehicles for longer.
“Corporates are sitting on cash and holding on to their cars for longer. They would rather spend on maintenance than buy new cars because of uncertainty. It’s a reflection of business confidence,” said Nghona.
The decline in the car rental category can also be attributed to subdued or poor growth in numbers of tourists, key drivers of the rental market.
Nghona says the finance industry had seen an increase in applications for car finance in June from a year before, suggesting that consumers wanted to purchase vehicles “but the reality is that household debt is also high”. The move away from buying brand new cars towards demo and used vehicles also continues, with Wesbank financing an average of four times as many used cars as new ones.
Similar news comes from others in the industry. “Passenger vehicle sales for the first six months of the year continued to show pressure and registered a decrease of 3 percent compared to the same period last year,” says Nicholas Nkosi, head of Standard bank vehicle and asset finance. “New car sales are expected to continue being under pressure for the remainder of the year. For consumers who are looking at buying, this presents good opportunities for good deals in both new and pre-owned markets.”
Nkosi said Standard Bank had seen the average contract term increase from 65,5 months in June last year to 68,8 months this year while the average deal size had fallen from R296 267 in June 2014 to R289 140 in June this year.
Sales of light commercial vehicles, bakkies and mini buses showed growth of 1,5 percent year on year in June. Nghona said they had seen aggressive growth in the bakkie segment probably due to the quality of products on offer and intense competition in the segment. Sales of medium-sized commercial vehicles fell by 11,4 percent while sales of heavy commercial vehicles, trucks and buses were down by 16,3 percent. This is attributed to slowing infrastructure spending by government, and companies deferring decisions to purchase.
Exports, showing an increase of 33,8 percent to 31 422 units in June, provided one bright spot in new cars sales figures. For the first half of the year, exports were up 45,2 percent on the first half of last year, according to Standard Bank. -ANA
(File Photo: Gallo Images)