Weak vehicle sales show negative consumer confidence in a low growth climate

In South Africa new vehicle sales are one of the leading market indicators, which provide important information about the economic climate in the country. Given that they don’t come cheap, when sales are up it shows a strong sign of positive consumer and business confidence.

The latest data released by the National Association of Automobile Manufacturers of South Africa (Naamsa) on Monday reveals that South African consumers are not confident about the trajectory of the economy and are unwilling to invest and purchase new vehicles.

Total sales declined for the third consecutive month in 2019 with March figures coming in at 3.1% lower than the same time last year. Naamsa said a total of 47 718 were sold in March, a decline of 1 512 units from the 49 230 vehicles sold in the corresponding period in 2018.

This was mainly due to a weak passenger car market that was partly offset by stronger commercial car sales.

However, Mike Mabasa, the executive director of Naamsa, said buoyed commercial vehicle sales were typical around this time of the year.

“Businesses plan ahead and many company’s financial year ends around March. They coincide major decisions like moving offices and purchasing vehicles either in the beginning of their financial year or towards the end,” Mabasa explained.

Read: Economic growth seen stagnant as confidence wanes

The downward trend in vehicle sales has been consistent for a large part of the last five years.

According to Naamsa’s sales projection schedule between 2014 and 2018, vehicle sales only recorded increases in 2017. Total aggregate sales including exports declined by 4 960 units in 2014 compared to the previous year, 2015 and 2016’s combined sales plunged by 96 735. While 2017 saw a recovery of 10 181 units more than half of it was discounted by 2018’s 5 477 sales contraction.

“If you look at the GDP growth over [those] years, it has also been subdued. You see the exact same movement in relation to vehicle sales,” said Mabasa.

In that period, South Africa’s economic growth rate levels were between 0.6% and 1.7%.

The country’s automobile industry contributes 6.9% to GDP and accounts for 30% of the country’s manufacturing output and 13.9% of total exports.

WesBank executive head of Motor, Ghana Msibi said the market’s performance is expected to improve in the second half of 2019.

“The market will remain under pressure during April, which will be impacted by public holidays and resultant fewer selling days, as well as a wait-and-see mentality heading up to elections in May,” said Msibi in a statement.

But Msibi added that, “while sobering, the market picture is not all doom and gloom, nor unexpected. We forecast first half sales to be slow with a better-performing second half.”

Mabasa said the association expected sales to “significantly” improve after the elections.

Source: moneyweb.co.za