JOHANNESBURG, South Africa – The effect of the recent downgrading of the South African economy to junk status continued to be felt in the new vehicle local sales industry, according to data collated by WesBank.
Sales for May 2017, as reported by the National Association of Automobile Manufacturers of SA, showed a year-on-year decline of 2.6% after year-to-date sales to April shrank 1.4%.
With May’s decline, YTD sales are now down 1.7%.
Rudolf Mahoney, head of brand and communications for WesBank, told The Corner in a media release: “WesBank forecast marginal growth for 2017 – but with the expectation of a stable economic environment. However political and economic uncertainty affected not only this outlook but also consumer-buying.”
He added, however, that rental sales were positive with May’s 6.8% sales increase pushing YTD growth to 20.1%. “However, these gains were out-performed by the 2.5% decline in passenger vehicle sales – the largest segment in the market.”
May was favourable for sales with four working days more than April and one more than the same period in 2016.
“Despite this,” Mahoney added, “overall sales declined. We can only attribute this to uncertainty among buyers.”
Two indicators of such uncertainty were shown in WesBank data. May saw year-on-year increases for average deal duration for new and used. Statistics showed that people were hesitant to replace vehicles: the replacement cycle extended by nine percent compared to May 2016.
VALUE FOR MONEY KEY TO SALES
Those who did return to the market chose to manage risk by opting for fixed-interest rates to avoid potential future rate increases. Data from WesBank showed a 19% increase in demand for fixed interest since South Africa’s economy was downgraded to junk.
“Affordability and value-for-money also continue to affect purchase decisions,” Mahoney explained. “Demand for balloon payments has risen 13%, year-on-year, showing that buyers are seeking lower monthly instalments.”
Demand for used vehicles continued with the used/new ratio reaching 2.37-to-1 in the past month.
‘SPEND WISELY, HEDGE RISKS’
Mahoney concluded: “A lot of uncertainty exists as a result of recent economic developments, making it difficult accurately to predict the outlook for the motor industry for the rest of 2017.
“The market is a lot clearer for buyers, however – but we suggest they spend wisely and try to hedge their risks.”