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Commentary: Standard Bank sees aggregate vehicle sales climbing 2% y/y in 2017 to 565,000

Commentary: Standard Bank sees aggregate vehicle sales climbing 2% y/y in 2017 to 565,000

The overall drop in new car sales in South Africa bottomed at the end of 2016 and is now in positive territory, with Standard Bank Vehicle and Asset Finance predicting annual aggregate vehicle sales lifting 2% year-on-year (y/y) in 2017 to 565,000 units.

This follows this week’s National Association of Automobile Manufacturers of South Africa (Naamsa) data for November 2017 showing that aggregate domestic vehicle sales have recorded y/y gains for the sixth month in succession, despite the difficult economic environment.

“While November is up 7.2% y/y, the year-to-date market is also up 2.2%. New passenger vehicle sales continue to drive this growth with a 16.4% increase y/y for November and a 2.6% increase year-to-date,” says Mr Simphiwe Nghona, Standard Bank Group Head: Vehicle and Asset Finance.

This positive trend was also reflected on Standard Bank’s vehicle asset book, with its passenger segment up an impressive 29.6% y/y.

While the average deal size in the Standard Bank vehicle division is down 7.2% from the prior year, it has been increasing marginally since June.

Stable inflation is expected to encourage future vehicle sales. The bank has revised its expectation of inflation to 5.3% y/y on average in 2017 and 5.0% y/y in 2018.

“There is, however, likely to be a fair degree of volatility in the CPI trajectory over 2018, due to the currency and to base effects created by the petrol price in 2017. Our base case prime interest rate expectation is flat at 10.25% into 2018 and we expect this to be maintained for the first quarter 2018,” says Nghona.