Brian Joss – While South Africa’s Budget Speech may only have an effect on new vehicle sales during March, the market seemingly reacted positively during February.
In January, WesBank had forecast the market to decline 3.5% this year, and the second month of the year will have already corrected January’s performance.
After January’s 8.1% decline in new vehicle sales (excluding BMW numbers as a result of their changing reporting structure), February provided some level of relief for a better outlook for 2020. According to the National Association of Automobile Manufacturers of South Africa (Naamsa), the February market declined just 0.7% to sell 43,485 new vehicles, the leap year providing a welcome leap (relatively) in the market’s performance.
“More selling days than usual during February thanks to the leap year may have contributed to the improved performance of the market,” says Lebogang Gaoaketse, head of marketing and communication. “Reported numbers also include BMW sales, showing a more representative outlook than January was able to.” February is traditionally the first realistic picture of the year’s outlook for sales, January being skewed by the holiday season.
The passenger car segment took all the glory, growing an impressive 7.6% to 29,665 units. Contributing to the performance was a significant 4,736 units from the rental market, up 20.6% on February last year. Still, the dealer channel was 5.3% up and represented 77.2% of passenger car sales indicating an uptick in consumer activity on the showroom floor.
The Light Commercial Vehicle (LCV) sector continued to struggle, looking like a market desperate for resurgence. Sales tumbled 17.7% to 11,625 units, with its dealer channel fairing even worse, down 19.4%. The segment didn’t receive the support from the rental market that passenger cars did, this channel down 48.3%. Government sales only showed slight relief, up 7.5% at 1,109 sales.
The economic outlook for the country isn’t going to give the market an easy ride. “While consumers were shown some relief in the Budget in income tax terms, increases in toll fees and fuel levies will continue driving the total cost of ownership up, forcing consumers to be increasingly vigilant about their discretionary spend,” says Gaoaketse. “Simply put: if there is an opportunity for consumers to defer vehicle purchases, we expect them to do so.”
Consumer price inflation rose to a seven-month high in January off the back of fuel prices that were 15% higher than a year ago. While remaining within the Reserve Bank’s 4.5% target range – which it has for 14 months, the longest streak in 14 years – the forecast is for it to average 4.7% this year.
“All of this will continue to put pressure on household budgets and directly impact new vehicle sales as consumers tighten their belts,” says Gaoaketse.
“However, the February market performance is a welcome sign of positivity.”
CAPTION: Leap year boost: Lebogang Gaoaketse, WesBank head of marketing and communication. Picture: Motorpress