New vehicle sales data shows a reasonable rebound for the motor industry, swinging back from challenges in October – but Nedbank warns that market conditions remain tough for the months ahead.
The latest Nedbank analysis of vehicle sales in South Africa showed that during the Transet labour strike in October – where thousands of workers downed tools – local car sales fell partially.
Exports plunged after operations at essential ports across the country were suspended for about two weeks, the bank said, adding that a shortage of some imported models also played a significant role.
“Local volumes fell by 4.2% month on month, with passenger and commercial sales down by 5.5% and 1.4%, respectively. The Automobile Business Council (ABC) reported that sales by a new member company are now included in the sales figures,” it said.
The most popular brands sold, according to TopAuto and data from the National Association of Automobile Manufacturers in South Africa (Naamsa), included Toyota in the top position with 12,500 sales, followed by Volkswagen in second with 4,900.
In terms of export, the Transnet strike initiated the sharpest decline in 13 months, with volumes dropping by 28.8% compared to the month before; volumes were, however, still up when compared year-on-year.
Despite the severe impact on businesses, the vehicle market continued to show a reasonable recovery.
The rental industry went on to boost the local market when the shortage was in place by accounting for 13% of total sales. The number of passenger vehicles sold totalled 30,500 units, a 10% gain compared to the year before.
The rental industry accounted for 17.4% of the volumes in October from 18.9% in September, said Nedbank.
This strong trend bodes well for rental companies who are renewing their fleets ahead of the holiday season. Nedbank said that light commercials rose by 14.3% year-on-year, while medium and heavy commercials also reflected steady rebounds, albeit off a relatively low base.
According to Nedbank, domestic sales are expected to slow further during the last portion of this year and into the beginning of the next.
“Regular and disruptive power outages will continue to undermine vehicle production and sales. Weaker household finances will also weigh on consumer demand for vehicles.”
The bank said that higher inflation and a rapid rise in interest rates would erode household incomes and subdue demand for credit.
Interest rate hikes typically take between 12 to 18 months to affect demand, suggesting that the slowdown in the passenger and light commercial vehicle markets will likely intensify in 2023, it said.
However, company demand is likely to continue being more resilient as the recovery in the travel, tourism and hospitality industries – although still has some way to go to reach pre-pandemic levels – continues.
In terms of exporting, the ABC remains upbeat, forecasting the total volume at well over 300,000 in 2022.
“However, global economic conditions have deteriorated significantly, given persistently high inflation and aggressive interest rate hikes in many advanced and developing countries,” said Nedbank.
In addition, the slow normalisation of operations at Transnet ports will also contain export volumes. Therefore, monthly volumes will likely drop going into 2023.