Plunge in new vehicle sales continues

A total of 41,639 vehicles were sold last month, a year-on-year decline of 15.3%. New vehicle sales for the year are down 11.4%, ending the year on 547,442 units; the lowest levels seen since 2010.

The decline in December sales reflects the rest of 2016’s performance. Passenger car sales were 14% lower at 28,331 units, while light commercial vehicle (LCV) sales slowed 17.8% to 11 303 units. This is in contrast to the overall numbers for the year, which show LCVs performing better than passenger cars with an 8.9% decrease in sales volume for the year ending 2016, with Passenger cars losing ground by 12.4% for the period.

The effects of dwindling consumer confidence are evident in the decline of dealer channel sales numbers, which fell 15.4% in December and by 11.7% over the course of the year. This is also reflected in WesBank’s experience of 12.1% fewer applications for new vehicle finance. One of the saving impacts for the new vehicle market in 2016 was the 15.9% increase in sales to the rental companies, despite this channel showing a 19.3% decline in December.

Consumer demand for new cars has decreased sharply as a result of price increases, underperforming GDP growth and household budgets becoming more stressed. During 2016, new car prices increased 11.03% (as measured by WesBank’s average transaction value) against used car price inflation of 6.83%, driving consumers into the pre-owned market where better value is being realised. This is also supported by WesBank’s used car finance applications increasing 4.2% during 2016, resulting in 2.39 used car applications for every new car finance application.

2017 expectations

“We expect 2017 to be another challenging year for the industry, but slightly better than 2016,” says Rudolf Mahoney, head of brands and communication. “The rand/dollar exchange rate remains fairly stable at the moment, which should mean less aggressive car price increases. The South African Reserve Bank has a more positive GDP outlook for 2017; we also do not anticipate significant interest rate movements up or down, making affordability considerations easier for consumers.

"One of the biggest risks will be rising fuel prices, which stand to impact individual’s monthly mobility costs. OPEC (Organisation of the Petroleum Exporting Companies) has, for the first time, agreed on production cuts which resulted in an immediate increase in the price of oil. Should the price of oil move anywhere near the historical benchmark level of between $80 and $100 per barrel, compounded by the prevailing weak rand, motorists will see the price of fuel increase to new record highs.”

All is not lost for motorists looking for a new car, says Wesbank. Consumers can expect to benefit from aggressive marketing initiatives by the manufacturers and dealers as they compete to maintain or grow their sales numbers in 2017. “When looking at buying a car this year, look for the deal, not the car,” says Mahoney.