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Comment on the December 2017 monthly sales, calendar 2017 new vehicle sales statistics and prospects for 2018

Comment on the December 2017 monthly sales, calendar 2017 new vehicle sales statistics and prospects for 2018

1.BRIEF COMMENT ON DECEMBER, 2017 SALES

Industry domestic sales ended 2017 on a weak note with aggregate industry new vehicle sales for December, 2017 at 40 636 units recording a decline of 1 008 vehicles or a fall of 2.4% compared to the total new vehicle sales of 41 644 units during the corresponding month of December, 2016. The December, 2017 new passenger car market and light commercial vehicle market reflected a year on year volume decline of 6.4% in the case of cars and a noteworthy improvement in the case of light commercial vehicles of 7.0%. Sales of medium and heavy commercial vehicles were essentially unchanged year on year.

In contrast, export sales had recorded a decline in December, 2017 and at 17 374 units reflected a fall of 1 333 vehicles or 7.1% compared to the 18 707 vehicles exported during December, 2016. This was largely attributable to the effect of model run out and new model introduction of the new VW Polo range in 2018.

2.COMMENT ON 2017 NEW VEHICLE SALES AND VEHICLE EXPORTS: A CHALLENGING YEAR CHARACTERISED BY A SLIGHT IMPROVEMENT IN DOMESTIC SALES OFFSET BY A MODEST FALL IN VEHICLE EXPORTS

For the first time in four years, new vehicle sales during 2017 in South Africa recorded a year on year improvement, albeit at a modest 1.8% in volume terms.   The improvement, due to modest gains in new car and light commercial vehicle sales, was encouraging given subdued economic growth, pressure on consumers’ disposable income and low levels of consumer and business confidence. The marginal decline in interest rates in July, 2017 had a positive effect. In the event, aggregate sales during 2017 rose by 10 039 units or 1.8% to 557 586 unit sales compared to the annual sales total of 547 547 in 2016. Major contributory factors to the improved new car and light commercial vehicle sales were the continued strong contribution by the car rental sector which accounted for an estimated 16.0% of new car sales during the year as well as unprecedented sales incentives by manufacturers and importers particularly during the second half of 2017.

Annual aggregate annual industry sales by sector, since 2014, were as follows –

 Sector

2014 2015 2016 2017

2017 / 2016

% Change

Cars 438 938 412 478 361 264 368 068 +1.9%
Light Commercials 173 492 174 701 159 283 163 346 +2.6%
Medium Commercials 10 780 10 394 8 315 7 785 -6.4%
Heavy Trucks, Buses 20 534 20 075 18 685 18 387 -1.6%
Total Vehicles 643 744 617 648 547 547 557 586 1.8%

Source: Lightstone Auto, NAAMSA

Whilst the modest improvement was welcome, the figures should be seen in the context of industry sales 11 years ago when the domestic market recorded an all-time high sales number of 714 314 units of which the new car market had represented 481 558 vehicles.

2017 Vehicle exports represented the third highest annual Industry export figure on record and total vehicle exports at 329 053 units were down on the 344 820 vehicles exported in 2016 – a decline of 15 767 units or a fall of 4.6%.

2017 Industry export sales data, compared to previous years, were as follows –

  2015 2016 2017

2017 / 2016

% Change

Cars 229 723 238 547 221 928 -7.0%
Light Commercials 103 000 105 219 106 126 +0.9%
Trucks & Buses 1 124 1 054 999 -5.2%
Total Exports 333 847 344 820 329 053 -4.6%

Source: Lightstone Auto, NAAMSA

Assuming continued improvement in the global economy – industry export sales during 2018 were projected to improve by about 37 000 vehicles or about 11.0% to reach a total projected number of 366 000 export units.

3. INDUSTRY PROSPECTS FOR 2018: FURTHER MODEST IMPROVEMENT IN DOMESTIC NEW VEHICLE SALES AND UPWARD TREND IN VEHICLE EXPORTS

South African financial markets have reacted positively to the outcome of the December, 2017 ANC elective conference. However, economic and fiscal policy uncertainty, political challenges, the risk of further credit rating downgrades and increasing geo-political tensions make forecasting difficult.

On the positive side, several recent economic indicators support the view that the South African economy is performing better than anticipated despite low levels of business and consumer confidence. Barring a further credit rating downgrade, an improvement in economic growth from about 1.0% in 2017 to around 1.9% in 2018 remains possible and this would lend support to new vehicle sales in the domestic market. The substantial improvement in the Reserve Bank’s leading indicator of economic activity heralds improved economic prospects. Also on an encouraging note, the positive global economic environment – with International Monetary Fund projections of 3.7% global expansion – will lend support to industry export sales.  

Faster economic growth remains an imperative to address South Africa’s socio-economic challenges and to take pressure off strained public finances and overburdened taxpayers. In this context, concerted steps are needed by Business, Government and Labour to create a more investor-friendly environment as a means of boosting growth.

NAAMSA anticipates further modest improvement in domestic new vehicle sales during 2018 as well as further growth in vehicle exports and industry production numbers.

The outlook for 2018 in terms of Industry domestic vehicle sales by sector is summarised hereunder –

 Sector

2015 2016 2017 2018 Projected
Cars 412 478 361 264 368 068 375 000
Light Commercials 174 701 159 283 163 346 170 000
Medium Commercials 10 394 8 315 7 785 8 000
Heavy, Extra Heavy, Commercials, Buses 20 075 18 685 18 387 19 000
Total Vehicles 617 648 547 547 557 586 572 000

Taking into account the time effect of various new model introductions, the new car market should improve during 2018 by around 2.0% and the light commercial vehicle market by double that percentage.

Factoring in the expected improvement in exports, domestic production of motor vehicles in South Africa was expected to show an increase from 588 000 vehicles produced in 2017 to close on 635 000 vehicles in 2018 – an improvement in vehicle production of about 8.0% This figure could prove conservative if vehicle exports expand more than currently anticipated.

Best wishes for 2018 to the media and all automotive industry stakeholders.

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