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Car sales expected to remain subdued

Buyers are spoilt for choice, but even lower interest rates aren’t expected to help much in 2020.

Figures from the National Association of Automobile Manufacturers of South Africa (Naamsa) show that total vehicle sales fell by nearly 3% in 2019, with sales in the ever-popular light commercial vehicle segment declining by at least 4%.

Naamsa, which has been publishing vehicle sales figures for decades, notes that the interest rate cut mid-2019 did little to help new car sales last year.

In addition, it does not expect new vehicle sales to improve much this year, despite the surprise reduction in interest rates a few weeks ago. Naamsa CEO Michael Mabasa says that while the recent rate cut is a welcome relief to consumers, the organisation does not think it will have a significant effect on buying patterns at the moment.

“Our outlook for the year ahead will mostly be flat,” says Mabasa. Naamsa estimates that its members will probably sell about 560 000 new vehicles this year compared to 536 626 in 2019.

The association reminds people of the economic importance of the automotive manufacturing industry for SA, mentioning the foreign earnings of exports and the thousands of job opportunities created in the industry. However, the opposite is also true in that:

The volume of new car sales is an important indicator of economic activity.

Few people would spend R300 000 or sign a financing agreement for six years to buy a new car if they are worried about their finances and, by implication, their view of the economy.

The performance of the new car market is a strong leading indicator of economic activity – with an uptick in car sales predicting an improvement in the whole economy, from manufacturing and banking to insurance and tourism.

Naamsa points out that the new vehicle market in SA has been on a downward trajectory since 2013 with only 2017 showing a small increase in new vehicle sales.

Total new vehicle sales of 536 626 units in 2019 is nearly 20% lower than in 2013.

Total new vehicle sales in SA

2014 643 744
2015 617 650
2016 547 552
2017 557 703
2018 552 227
2019 536 626

Source: Data from Lightstone Auto

Naamsa attributes the decline to the subdued macroeconomic environment, pressure on consumers’ disposable income, and fragile business and consumer confidence. “The decline in new passenger car and light commercial vehicle sales occurred despite the strong contribution by the car rental sector during the year and an improvement in new vehicle affordability in real terms,” it states.

Naamsa also noted a trend that consumers are “buying down”, with sales of entry-level cars and smaller sport utility vehicles (SUVs) performing better than sales of larger and more expensive models.

NaTIS (the national administration traffic information system) shows that the number of cars on the road in increasing steadily, indicating that the used car market is robust.

Official figures show that the number of passengers cars, mini-buses and light commercial vehicles increased from around 8.2 million at the end of 2011 to nearly 10.5 million at the end of 2018.

It seems there are a lot of people who would probably like to buy cars. NaTIS figures show that more than 12 million people have valid driver’s licences for cars and similar vehicles (code B and EB licences). Maybe the trying economic environment is holding them back.

However, a closer look at December sales figures shows that there are still people who are spending money on (very) expensive cars.

A cracker of a festive season for some

In the weeks running up to Christmas, Lamborghini sold two of its super sport cars. The cheapest Lamborghini is listed at R3.5 million while the other four models available in SA retail for just shy of R6 million to nearly R9 million.

Three people were willing to fork out between R4.2 million and R8.2 million for a new Ferrari during December, while Bentley delivered six new cars at between R3 million and R7 million each. Maserati sold 12 cars, listed at R1.6 million to R3.3 million.

And no fewer than 142 lucky drivers collected a new Porsche during December.

Price guides published in newspapers’ Thursday motoring pages and motoring magazines show that the entry-level Porsche Boxster is still listed at below R1 million, but most are imported with a few extras that will push the price closer to R1.2 million. The most expensive Porsche is the Panamera sedan with a hybrid power plant at R3.5 million.

Spoilt for choice

South Africans are spoilt for choice when looking for a new car, with 43 different brands readily available. The manufacturers list 1 334 different models and variants, according to the buyer’s guide published in Car Magazine.

This is less than the nearly 1 800 distinct models counted five years ago, but it still seems like a huge offering to a market that scarcely buys 500 000 new cars every year.

Of all the brands in SA, Toyota offers the largest range of cars, light commercial vehicles and SUVs – listing 112 different models, variants and engine options. It is also the most popular brand by far.

Around 26% of all new vehicle sales in December – 10 936 out of a total of 41 698 – were from a Toyota plant.

It is thus not surprising that Toyota announced last week that it is investing a further R4 billion to expand production and tool up for new models in its SA plant.

Read: Toyota injects R4.28bn into SA’s economy

Land Rover, surprisingly, offers the second largest range. There are apparently 105 distinct different models of Discovery and Range Rover available in SA, while Mercedes is also trying to offer something in every thinkable segment of the car market with 103 models.

Models offered by manufacturers

Brand

Models and variants

Toyota

112

Land Rover

105

Mercedec Benz

103

BMW

86

Ford

69

VW

64

Nissan

52

Jaguar

51

Audi

49

Porsche

48

Hyundai

45

Kia

40

Suzuki

40

Mazda

39

Source: Car Magazine, February 2020

The big choice comes at a cost and cars are expensive, or rands aren’t worth much anymore in 2020.

The cheapest car is a small Suzuki hatchback at around R142 000 and there isn’t much else with a price tag lower than R200 000.

For the executive, the cheapest BMW 3 series is listed at more than R600 000, as is the smallest Mercedes-Benz C-Class.

Naamsa laments the fact that the economy is not growing to support new car sales, as well as the continued electricity disruptions that affect the economy as a whole.

“SA’s GDP rate too often found itself in negative territory during 2019,” says Mabasa commenting on the 2019 sales figures. “Most automotive companies are planning their operations on the basis of a flat market in 2020.”

It’s not all doom and gloom for the industry, however. Manufacturers have steadily increased exports of local manufactured vehicles and components, and total production has been increasing as a result.

Last year, SA manufacturers exported more than 386 000 vehicles, equal to around 42% of the total production.

Mabasa points out that vehicle exports reached a record high last year and is expected to increase further in 2020 based on existing contracts.

Naamsa says that components, parts and completed vehicles are exported to 115 countries and the motor manufacturing sector is the fifth largest exporter in SA, accounting for 14.3% of SA’s total exports.

But local car sales will only pick up if the economy grows at above 1% per annum, according to Naamsa’s analysis of the industry.

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I attribute the decline to the absolute rip-off prices and export parity pricing. One can buy some locally available cars for almost half the price in the USA.

It is mostly in the name of protecting the SA auto “industry”; really just a glorified assembly line manned by overpaid, under skilled workers, subsidised by the SA taxpayer. But they are faithful to the ANC so must be kept on.

End of comments.

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