Slow but steady recovery in new vehicle sales

The country reeled in the face of rising fuel prices and interest rates during July, but seemingly without effect on new vehicle sales.

29 WesBank2 naamsa infographic July2022

“It would be easy to get over-excited about July sales when looking just at the numbers,” said Lebogang Gaoaketse, Head of Marketing and Communications at WesBank. “However, the context of July last year is critical to appreciating the slow and steady growth being experienced in the market.”

But growth it is, which remains reassuring. According to naamsa | the Automotive Business Council, new vehicle sales grew 30.9% to 43,593 year-on-year, the fourth consecutive month of sales growth since the market’s slow April performance.

In similar vein, July 2021 sales were the lowest recorded last year due to heightened COVID-19 restrictions to Level 4 and the KZN unrest that also interrupted logistics. As a result, year-on-year comparisons are skewed, although July sales still grew 6.3% month-on-month to record the third-best sales month this year.

"The significant increase in interest rates during the month may dampen August sales as new deals confront an affordability challenge or consumers simply delay purchase decisions,” said Gaoaketse. “Nevertheless, interest rates remain relatively low, continuing to make a new vehicle purchase an appealing financial opportunity currently.”

WesBank expects further interest rate hikes for the remainder of the year, providing an opportunity for the market to conclude deals before these expected increases and capitalise on savings to be made in the early part of the contract.

Passenger car sales jumped 50.2% during July to 31,455 units. Relatively, this represented a 6.5% growth month-on-month, which was still ahead of the whole market growth. The segment was buoyed by 4,150 rental sales units.

Light Commercial Vehicle sales declined 6.9% year-on-year but actually showed a 7.6% growth compared to June sales. This segment sold 9,547 units during July.

"Affordability remains a key driver in the vehicle purchase journey,” said Gaoaketse. “WesBank’s average deal size on new sales financed by the bank were lower during July than a year ago, despite price increases. Deals financed with a balloon payment have also increased substantially, indicating a need to lower the monthly instalment to suit household budgets.”

Year-to-date sales continued to show growth off a similar context to July’s sales. The first seven months of the year have delivered a 13.9% growth in sales to 297,133 units, making it possible for the new vehicle market to exceed 500,000 sales in 2022.

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