Figure 1: New vehicle sales volume growth
  • December traditionally sees lower sales volumes as purchases are typically postponed to January so new year registrations can be obtained.
  • In terms of the sales performance for 2017, domestic car sales rose by 1.8% y/y compared to the contraction of 11.4% y/y in 2016.
  • Passenger vehicle sales lifted by 1.9% y/y in 2017 versus the decline of 12.5% y/y in 2016. Contributing to this recovery was demand from rental agencies as well as more attractive sales incentives, slower new vehicle price inflation and stable interest rates that supported consumer demand (see figure 3).
  • However, passenger vehicle volume sales are still below the aggregate sales levels registered in the years leading up to the 2008/09 recession. Heading into 2018, consumer demand, and by extension sales volume growth, is likely to be constrained by the weak labour market, the Q4.17 tightening in credit conditions applied to households and weak confidence levels (see figure 4).
  • Indeed, according to the Q4.17 BER Retail Survey, new vehicle traders expect only a modest improvement in Q1.18 (see figure 5).
  • In 2017, commercial vehicle sales rose by 2.4% y/y after contracting by 8.9% y/y in 2016, mainly on account of an increase in light commercial vehicles as both medium and heavy commercial vehicle sales continued to decline.
  • Light commercial vehicles are often associated with the retail sector, particularly online shopping deliveries.
  • The decline in medium and heavy commercial vehicles reflects the weak investment climate that in turn is affected by low demand, excess capacity and to an extent, perceived heightened policy uncertainty.
  • Vehicle exports declined by 4.6% y/y in 2017 after a 3.3% y/y rise in 2016. According to NAAMSA the export underperformance was partially affected by adverse weather conditions that impacted the Durban port operations and production at the Toyota plant. Moreover, Volkswagen SA stopped production of the Polo model ahead of the launch of the new model in 2018. However, in 2018 “vehicle exports expected to recover on the back of positive global economic growth prospects”.
Figure 2: New Vehicle Sales
Figure 3: Rand versus new vehicle price inflation
Figure 4: Credit standards for approving loans
Figure 5: New vehicle sales versus new vehicle trader confidence