Car Sales up in a Surprise Move

The car sales sector is not the only one that got hammered in the aftermath of the recent financial crisis, but sales are generally also an indicator for increased disposable income and / or corporate spending. In South Africa sales of motor vehicles surprised positively last month by showing a 7.5% surprise move upwards. The figures compiled by the National Association of Automobile Manufacturers of SA (NAAMSA) were released by the Department of Trade and Industry (DTI) today. NAAMSA said in a statement: “Aggregate industry sales of 53 997 units for May reflected an increase of 7.5% or 3 750 vehicles from the 50 247 units sold in May last year.” The figures indicated that 9% of sales were to corporate fleets‚ the rental industry and the government‚ suggesting that fleet managers were potentially moving to avoid price rises associated with inflation and the plunging value of the Rand, rather than spending excess cash.

In reality the outlook for the rest of the year is bleak. Domestically‚ expectations of lower GDP growth and above-inflation new vehicle price increases – as a result of the sharply weaker exchange rate and the April increase in carbon dioxide vehicle emission taxes on new cars and certain categories of new light commercials – will contribute to a more difficult trading environment. Standard Bank’s head of asset finance Sydney Soundy said in a release that inflation would soon hit the industry. “The exchange rate will impact the vehicle market through vehicle price inflation and indirectly through the fuel price fluctuations‚” he said. The Rand’s weakness will also transfer onto both vehicle prices and energy costs (in particularly fuel prices, so don’t be fooled by the fuel price reduction on Wednesday).The price of fuel in the country has gone up by 210.5% and 354% in petrol and diesel since 2001, slightly more than in Europe. This adverse effect will still be accelerated by introducing e-tolls…..which could not have come at a worse time.

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