Temporary setback to sales of new vehicles

Sowetan Reporter

Sowetan Reporter

The new National Credit Act and the interest rate increase caused a decline in new car sales last month, but industry experts believe the setback is temporary.

The latest results released by the National Association of Automobile Manufacturers (Naamsa) and Associated Motor Holdings (AMH) show that new vehicle sales in June dropped by 12,1percent to 54061 units in comparison with last year June's performance.

Passenger vehicle sales decreased by a significant 19,1percent last month to 34142 units and were also 4,4percent down on results recorded in May.

Brand Pretorius, chairman of McCarthy Motor Holdings, said the decline was partly the result of the negative impact of the fifth consecutive interest rate increase by the reserve bank recently.

"Sales were also adversely affected by recent new vehicle price increases, which put added pressure on vehicle affordability," said Pretorius.

Most vehicle retailers also had significantly lower credit application approval rates due to the introduction of the act last month.

"However, we believe that the majority of the implementation problems with regard to act-compliant documentation, systems, processes and credit scoring models have now been sorted out and the expectation is that the negative sales trend, which manifested itself during June, will level out in July," said Pretorius.

"It is also likely we will start to see the positive impact of the private leasing option in the coming months, which has now become permissible," he said.

The above factors are also affecting the light commercial vehicle market, particularly the leisure pick-up segment, as evidenced by the 9,8percent drop in sales to 16555 units compared with May, and 3,6percent compared with June last year.

The positive growth in the medium and heavy commercial vehicle segments continues as increased investment in capital equipment and infrastructure development projects accelerate.

Sales in the medium vehicle segment increased by 5,8percent compared with June last year, recording 1385 sales. The heavy vehicle segment logged 1979 sales, an increase of 9,3percent on last June's results.

Pretorius said: "The total South African vehicle market is still expected to show a decline of between 4percent and 5percent by the end of the year, with an estimated total of 680000 units if one takes the Naamsa and AMH projected results into consideration."

On a year-to-date basis, passenger vehicle sales are 6,8percent down on the same period last year and it is likely that they will drop to about eight to 10percent by year-end.

Meanwhile, it seems likely that all commercial vehicle segments will log all-time record performances this year.

Light commercial vehicle sales are currently 12,4percent up on last year's results at 104877 units. Medium commercial vehicle sales are 8,3percent higher at 7270 units, and the heavy commercial vehicle segment has already grown by 20,7percent this year to currently stand on 10307 units.

"New vehicle demand will undoubtedly be stimulated by good stock availability and aggressive trading over the next six months, and it is likely that a buyers' market will prevail for the remainder of the year," said Pretorius.