01 August 2023: New vehicle sales held their own during July, showing marginal growth year-on-year, to record 43,389 units. According to figures released by naamsa | the Automotive Business Council, this represents growth of 1.3% compared to July last year.
“It isn’t surprising that the market appeared more subdued during July than the 14% growth experienced during June,” says Lebo Gaoaketse, Head of Marketing and Communications at WesBank. “First half targets and significant product activity and volume bolstered June sales. A market of over 43,000 units remains strong in the context of the 2023 performance.”
The impact of interest rate and inflation news during July could also provide impetus for August sales and the remainder of the year. Interest rates were put on hold for the first time since November 2021 and after 10 consecutive hikes, inflation fell within the target band, providing some relief for consumers.
Despite household budgets buckling under inflation and the rising costs of debt, consumers appear to still be enchanted by the allure of a new car. “While the impacts of inflation and interest rates are harder felt in bigger capital debt, such as home loans, vehicle affordability continues to be of concern to the motor industry and consumers’ sheer ability to be active in the new vehicle market,” says Gaoaketse. “However, vehicle price inflation has a bigger impact on the purchase decision than the ultimate ability to repay the instalment linked to interest rates.”
Gaoaketse said vehicle price inflation in the context of the average value of debt financed by WesBank was more than twice the consumer price inflation (CPI). “There is only so much affordability consumers can find in the new vehicle market by opting for lower-priced alternatives,” he says. “The base cost of entry is now at a level that begins to make an impact on the type of customer the industry can attract.”
Recent research by Lightstone shows that there are significantly less consumers under the age of 35 purchasing new vehicles than 10 years ago. “Whilst this may be impacted by mobility lifestyle choices of ride-hailing and sharing, rather than owning vehicles; the sheer affordability amongst rising household debt is limiting buying power in the market,” said Gaoaketse.
The passenger car market didn’t perform as well during July as it had the previous month, reporting a decline of 9.7% to 27,839 units, 1,956 units less than June. It had been marginally up the previous month but has been a weak performing segment for most of the year.
In contrast, Light Commercial Vehicle (LCV) sales were up 32.6%, recording 12,666 units. While lower in volume than passenger cars, the appeal of these vehicles – many of which are locally manufactured – is obvious from the consistent growth all year.
Year-to-date sales went through the 300,000-vehicle barrier, which it hadn’t done by July last year. The 309,359 units sold by the end of July is 4.4% ahead of the first seven months of 2022.
“With anticipated fuel price increases during August, the overall cost of mobility remains a key consideration for new vehicle purchase decisions,” says Gaoaketse. “Consumers should consider the entire cost of ownership when considering a new vehicle, not just the instalment amount. Insurance, fuel, and maintenance all impact affordability.”