New vehicle sales started the new year impressively strong, with new car sales improving by 26.6% to 30 037 units from the 23 732 units sold in January 2021.
Overall total new vehicle sales grew by 19.5% year-on-year to 41 382 units, according to figures released by automotive business council Naamsa on Tuesday.
Azar Jammine, chief economist at Econometrix, admitted he was not expecting an improvement of this magnitude in the new vehicle market in January.
“It’s a really good month and suggests there is a certain momentum in the economy in the short term that is helping it [the new vehicle market] to do quite well,” he said.
Jammine said there probably was a continuation of the buy-down trend in the new vehicle market but notwithstanding that, it is a good sign for the economy in the short term at least.
The seasonally adjusted index rose to 57.1 index points in January to recover from the loss of momentum and dip to 54.1 in December 2021.
The Bureau for Economic Research, which compiles the index, said the current PMI level is in line with that of November 2021 but above the average recorded in the fourth quarter of 2021 and reflects a strong start to the year for the manufacturing sector.
Jammine said these first two economic numbers released this year related to January “are both very positive”.
“The importance of this figure [new vehicle sales] is that it is the first concrete evidence of what has been happening in the economy this year,” he said.
“It’s got some resilience and in the short term it’s certainly not doom and gloom.”
Jammine said the January new vehicle sales figures are unfortunately not telling anyone too much about the economy in the longer term.
Unless the government sets about addressing the structural problems in the economy – such as corruption, state capture, the lack of infrastructural investment, education, the labour market, spectrum, electricity and state-owned enterprises – the country “will slide back into a very low growth environment”.
“But the momentum of recovery from the Covid-19 pandemic is still there [in the short term],” he said.
Sales of new light commercial vehicles, bakkies and mini-buses increased by 3.8% year-on-year to 9 629 units in January and heavy trucks and buses by 9.6% to 1 251 units while medium commercial vehicle sales declined by 4.3% to 465 units.
National Automobile Dealers’ Association (NADA) chair Mark Dommisse was not surprised by the strength of the new vehicle market.
If the total monthly sales of 41 383 in January is annualised, it ends up at a figure that is probably lower than market forecasts.
“I wasn’t surprised [by the strength of the market] because I think South Africa took a big break in December and consumers ploughed their money into other things.
“The car buying public put their money into vacation time when nobody has had a vacation for two years.
“With that in mind, plus the shortages across key model lines due to the [computer] chip supply shortages, I think it was a good number,” he said.
Corné Venter, CEO of Motus Retail and Rental SA, which is part of the JSE-listed automotive group Motus, said the new vehicle unit sales number for January was in line with their expectations given the current stock constraints and supply chain disruptions.
Venter said the same factors also drove a subdued car rental number, with some local production lost in January because of component shortages and other factors.
However, Venter said this lost production would in all probability be caught up “in the next month or so, making it into the hands of local consumers”.
Venter said the recent interest rate hikes have also negatively impacted consumer sentiment.
“We currently see the full-year unit sales number at between 500 000 and 525 000 units subject to stock constraints easing up,” he said.
Total new vehicle sales increased 22.1% year-on-year to 464 122 units in 2021 from the 380 206 units sold in 2020.
Upward trend expected to continue
Mikel Mabasa, CEO of automotive business council Naamsa, said the new vehicle market started the year off on a very positive note, continuing on its gradual recovery path to pre-Covid-19 levels.
In line with the moderate economic growth forecast for the country for 2022, the new vehicle market is expected to continue its gradual recovery to pre-Covid-19 levels, but at a slower pace, he said.
Mabasa said the new vehicle market trend over the next three years is expected to be upward, in close correlation with National Treasury’s projected domestic economic growth outlook, averaging 1.7% for 2022, 2023 and 2024.
Exports of locally produced vehicles declined by 9.3% in January to 19 089 units from the 21 051 vehicles exported in January 2021.
“Prospects for vehicle exports for 2022, although declining during the month, remain positive in line with favourable economic and market conditions abroad as well as on the back of further new model introductions by major vehicle exporters in the country in 2022,” Mabasa said.
Econometrix has forecast new vehicle sales growth of between 3% and 5% for 2022.
Dommisse believes the new vehicle market should “be comfortably over 500 000 units and maybe between 510 000 and 520 000” units this year.
“It is a reasonable number considering that [car] rental will take more cars and South Africa is waking up [and] the world economy.
“We’ll have more tourism. It will be a choppy year with interest rate hikes and inflation. It’s going to be a challenge but I think we will be comfortably over 500 000.
“Last year we had two lockdowns. We came out of quite a reasonable lockdown in January with the beaches closed and various restrictions in place during the second wave.
“Then the third wave in June/July plus the riots was a killer. We lost a serious amount of sales. If that doesn’t happen, and we don’t have any big wobble this year like that, we should easily have a sustainable 41 000 new vehicle sales a month, no problem,” he said.