The decline in vehicle sales is another sign that the economy is losing momentum, warned the National Association of Automobile Manufacturers of SA (Naamsa). Naamsa announced yesterday that year-on-year (y/y) new vehicle sales declined by 9.2% last month.
“The South African economy was losing momentum and risked moving into recession,” Naamsa said in a statement. “The decline in first-quarter GDP to negative levels, the dramatic decline in the purchasing managers’ index… the sharp rise in producer inflation and the worsening trade deficit all confirmed the advent of a more difficult economic environment.” As a result, the domestic automotive market was likely to continue facing headwinds in the short to medium term, it said.
h3. Under 50 000 new Vehicle Sales
In May 2014, aggregate new vehicles sales were 49 465 compared to the 54 490 sold in the same month last year. Naamsa said all segments and categories recorded y/y declines. Export sales declined from 26 252 in May last year to 15 613 this year, a fall of 40.5%. Overall, out of the total disaggregated reported industry sales of 49 465 vehicles, 86.8% represented dealer sales, 5.6% represented sales to the vehicle rental industry, 4.9% to industry corporate fleets and 2.7% to government. The new car market remained under pressure during May this year, with a fall of 11.3% compared to the same time last year. Domestic sales of new light commercial vehicles, bakkies, and minibuses declined by 5.1% compared to the corresponding month last year.
h3. Mixed Commercial Performance
Sales of vehicles in the medium and heavy truck segments reflected a mixed performance. Medium commercial vehicle sales showed a decline of 140 units or 14.4%. Heavy trucks and buses registered an improvement of 74 units or a gain of 4.3%. Industry new vehicle exports during May this year showed a sharp decline from 26 252 last year to 15 613 this year. “The decline in export sales was due to the discontinuation of an export model by a major vehicle manufacturer and the temporary lack of any contribution by Mercedes-Benz,” Naamsa said. “From the middle of 2014, the momentum of industry vehicle exports was expected to improve.”
The outlook for the automotive sector for the balance of the year looked increasingly less promising. “At this stage, Naamsa anticipated that the domestic market in 2014 was likely to register a decline, in aggregate terms, of between 3.5% and five percent compared to 2013,” it said.
h3. Second Hand Sales
In contrast WesBank’s data shows that the total number of finance applications is up 16% y/y – setting a new, all-time record of 124 770 – however the majority of this growth came from applications for used vehicles, which grew by 21% y/y, while new vehicle applications grew by 5%, y/y. “The record number of applications can largely be attributed to the credit amnesty legislation introduced in March,” said Rudolf Mahoney, head of research at WesBank. “There appears to be a level of misunderstanding among consumers regarding the legislation and their belief that their records may have been cleared. This is resulting in a great number of speculative applications, thus contributing to the growing surge in applications.”
The higher demand for used vehicles is as a result of consumers finding better value in the pre-owned market, driven by the rising prices of new vehicles. TransUnion Auto reported that new vehicle prices have increased 6.58% in the first quarter of 2014, contrasting with 0.83% for used vehicles.
h3. Negative Growth of Economy
WesBank pointed out that slow sales in the new vehicle market can be correlated to negative growth in the economy. The most recent figures from Statistics South Africa show GDP growth at -0.6% for the first quarter of 2014. New vehicle sales for same period were down -3.4%. “Historically, negative GDP growth is associated with increased activity in the used vehicle market,” said Mahoney. “Conversely, positive GDP growth correlates with a strong performance in the new vehicle market as the economy flourishes.” Given the current economic climate, WesBank expects the new vehicle market to continue to struggle, while consumers will turn to the used vehicle market.
New Finance Minister Nhlanhla Nene played down fears of the South African economy is heading into recession, reported City Press. This must be the joke of the day and can let us fear the worst for his future “guidance” and “leadership”. Since the new Minister of Finance seems to be as oblivious to what is going on in the country as his “Comrade President” we are in for the worst treat since 1990. Gordhan and Manuel, we miss you!!”