South Africa’s new vehicle market defied the slowdown in financial growth to report greater than forecast annual year-on-year growth of 13.9% in 2022, in response to statistics launched by automotive enterprise council Naamsa on Monday.
However, business gamers have warned that the sales outlook for this yr is probably not as promising.
Read: New vehicles to value as much as 10% extra inside months – CMH
The council reported that combination new vehicle sales elevated to 528 963 items in 2022, however whole sales are nonetheless 1.4% beneath pre-Covid-19 pandemic ranges (536 612 items bought in 2019).
However, Naamsa CEO Mikel Mabasa stated new vehicle sales registered year-on-year growth for 12 consecutive months in December 2022.
Mabasa stated the double-digit growth in sales in 2022 follows the 22.2% growth in sales to 464 493 items in 2021 in comparison with the 380 206 items in 2020 following the pandemic.
“The new vehicle market’s performance in 2022 remained resilient despite the multiple national and international headwinds,” he stated.
Headwinds
The headwinds included international provide chain disruptions brought on by the Covid-19 pandemic, Russia’s invasion of Ukraine, the influence of the devastating floods in KwaZulu-Natal, elevated inflation, an upward pattern in rates of interest, report gasoline costs, and report highs in the frequency and depth of load shedding, which weighed closely on each enterprise and shopper confidence.
Read:
Toyota confirms in depth flood injury at its Durban plant [April 2022]
Toyota resumes manufacturing at its plant in Durban [July 2022]
Toyota’s Durban plant targets pre-flood manufacturing ranges by December [Aug 2022]
“Despite the myriad of negative economic pressures and ongoing stock supply shortages, the new vehicle market continued to outperform expectations in 2022,” stated Mabasa.
“However, the consumer trend of buying less expensive and smaller cars, usually SUVs [sport utility vehicles] or crossovers, continued in 2022.”
Econometrix chief economist Azar Jammine stated the actual fact the brand new vehicle market had recorded double-digit growth in 2022 was “way in excess of the low single-digit growth expected a year ago”.
However, Jammine cautioned that the growth in unit sales has in all probability not been matched by income growth due to the shift to lower-priced entry stage autos from the costlier luxurious segments.
He stated this shift distorted the brand new vehicle sales numbers in unit phrases.
Jammine believes that a part of this shift has been pushed by preemptive shopping for, with individuals anticipating vehicle costs to extend sooner than they’ve in the wake of the depreciation of the rand in opposition to the greenback with out recognising that the rand has solely very just lately depreciated in opposition to currencies apart from the greenback.
He added that though rates of interest have risen, they aren’t that top by historic requirements.
Read: Interest charges are up 325bps this yr; how this impacts your debt
National Automobile Dealers’ Association (Nada) chairperson Mark Dommisse agreed that the quantity of recent vehicle sales was loads stronger than anybody anticipated, particularly in the previous few of months of 2022.
However, he believes new vehicle sales are being pushed by the sturdy worth providing in the R300 000 to R450 000 small SUV section and the nonetheless moderately low rates of interest.
“If you look at the peach segment, it is certainly in that small SUV segment. All the players [manufacturers] are going into that SUV segment. If I was buying a car today, I’d certainly be hunting there first,” he stated.
Nada director Gary McCraw stated it’s wonderful that the persevering with growth in new vehicle sales was achieved in a yr when Toyota misplaced about 70 000 items of native manufacturing due to the disastrous floods in KwaZulu-Natal that put its plant out of motion for 4 months.
Figures launched on Monday revealed that new automobile sales grew by 19.3% year-on-year to 363 092 items in 2022 from 304 341 items in 2021 whereas mild industrial vehicle (LCVs) sales elevated by 2% to 135 666 items from 133 077 items.
Jammine believes “some substitution effect” brought on the underperformance of LCVs relative to passenger autos.
But he’s uncertain how a lot of the efficiency distinction between these two segments had been brought on by provide points, ensuing in shoppers opting to buy vehicles as a substitute of LCVs.
Commercial autos sales
Sales of medium industrial autos elevated by 11.3% year-on-year to eight 370 items in 2022 whereas heavy truck and bus sales improved by 11.7% to 21 835 items.
Despite the disruption to manufacturing on the Toyota South Africa Motors plant brought on by the floods, vehicle exports grew by 17.9% to 352 450 items in 2022 from the 298 020 items exported in 2021.
Naamsa believes the brand new vehicle market will stay resilient in 2023 regardless of weakening home financial indicators and a deteriorating international growth outlook.
However, Mabasa stated GDP growth in South Africa continues to be adjusted downwards and is now anticipated to be at 1.1% for 2023.
“In view of the close correlation between new vehicle sales and the country’s GDP growth rate, single-digit growth in new vehicle sales could be expected for 2023 as the market returns to pre-pandemic levels in sales and exports,” stated Mabasa.
Jammine is anticipating very low new vehicle sales growth in 2023 – between zero and 5% and probably even damaging growth – due to the sharp rise in rates of interest and the truth that international financial situations have already began to sluggish, which is able to influence negatively on total financial exercise.
“South Africa is not immune from that, and it will affect export markets more than the domestic market but the domestic market will feel the headwinds as well,” he stated.
Read: Used automobile sales are flying, and Transaction Capital’s outcomes show it
Jammine added that new vehicle sales developments are associated to not the precise growth fee of the financial system however the fee of change in the growth of the financial system, and Econometrix’s financial growth forecast for South Africa in 2023 “is well below 1% and with that we would see very low growth in vehicle sales”.
“The other big elephant in the room is load shedding and the manner in which it is likely to depress domestic economic activity and have a knock-on effect down the line on economic growth and employment creation, which in turn helps to drive vehicle sales,” he stated.
Nada expects continued growth in the brand new vehicle market in 2023 however probably not on the fee beforehand anticipated.
McCraw stated lots of the components that hobbled the motor business in 2022 will sadly nonetheless be encountered in 2023.
