Vehicle Sales update: Rate of contraction in new vehicle sales decelerated in May
01 Jun 2017
New vehicle sales contracted by 2.6% y/y in May compared to a 13.4% y/y decline in April. The declaration in the rate of contraction in May is likely attributable to seasonal effects. Specifically, the extent of decline in April was likely exacerbated by the configuration of the Easter holidays this year versus last year.
Going forward, low statistical base factors could see the year-on-year sales outcomes improve, following three consecutive years of contractions. However, the underlying performance in the sector is expected to remain relatively subdued, in line with only a modest expected recovery in GDP growth in the region of 0.8% in 2017 from 0.3% y/y in 2016.
In May, passenger vehicle sales, which comprise 63% of total sales, declined by 4.6% y/y versus 6.6% y/y in April, and by 2.3% in the year to date.
Consumer affordability remains impacted by the higher interest rate environment, higher taxes and elevated new vehicle price inflation, in both new and used vehicles. The TransUnion vehicle price index for Q1.17 showed that the rate of increase in new and used vehicle prices rose to 8.8% y/y and 3.7% y/y, from 6.6% and 2.2% in Q1.16 respectively.
The passenger vehicle sales performance is also reflective of the contraction in credit granted for vehicle financing since H2.16 (see figure 3).
Commercial vehicle sales fell 2.9% y/y in May following a decline of 12.9% y/y in April. In the year to date to May, commercial vehicle sales contracted by 0.5% y/y.
The performance of the commercial vehicle sales segment will remain reliant on a lift in fixed investment rates and a strengthening in business confidence levels (see figure 4).
The National Association of Automobile Manufacturers of South Africa (NAAMSA) has noted that “the outlook for the balance of the year remains uncertain on the back of the extra-ordinary political events at the end of March, 2017 and early April, 2017”. The recent events are perceived to weigh on confidence levels in the economy.