First half sales encouraging

The improvement in year-on-year new vehicle sales in June this year and for the first half of 2021 “is genuinely great news”, according to the National Automobile Dealers’ Association (NADA).

stock image vehicles parked - Ryan Searle

“We are halfway through the year, and we are tracking ahead of most industry forecasts, and this is encouraging,” said NADA chairperson Mark Dommisse.

Total sales last month increased by 20.2% to 38 030 compared to June 2020, and total sales for the first half of 2021 are 40.1% higher than in the same period in 2020.

“The fact that 86.3% of the 38 030 new vehicles sold in South Africa in June went through the retail dealer channels is a strong indicator of growing confidence in buying capital assets by both the business and consumer sectors of the market,” Dommisse added.

"It is also encouraging to see the rental industry increasing its purchases as it accounted for 7.6% of total sales.

“This not only shows growing business confidence within this key economic indicator but also means that more vehicles will come into the used car market when the time comes to re-fleet,” he said.

Dommisse added that the gradual recovery in retail sales continued in June, which is in line with industry forecasts, despite the growing impact of the COVID-19 pandemic on the daily lives of people.

However, Dommisse said motor dealers in South Africa were realists and they know it will be tough to keep up the sales momentum in July, particularly as key living costs such as electricity and water, fuel and municipal rates and taxes will be increasing in many instances.

“During this time, dealers will also be dealing with the implementation of the Protection of Personal Information Act (POPIA), the planned roll-out of AARTO [Administrative Adjudication of Road Traffic Offences] and the Competition Guidelines for the local motor industry [aftermarket],” he said.

Henry Botha, head of strategy for Absa Vehicle and Asset Finance, said new vehicle sales in the month of June are usually very similar to May, with little month-on-month change, and the same trend was evident this year.

Botha said both passenger and light commercial vehicle sales in June were almost flat compared with May, which means the recovery in sales that started in about February or March this year is continuing.

He said the year-on-year comparisons were difficult to interpret because South Africa was still at COVID-19 lockdown Level 5 in June last year, which meant vehicles could not be moved in that period.

Botha added that the average vehicle volume run rate in 2019 was about 45 000 units a month and the market is currently still about 5 000 units below that run rate.

He said sales to the car rental industry could have contributed towards this decline, despite the rental market in June 2021 accounting for about 2 880 unit sales and about 7% of total sales.

“But the rental market could have been 5 000 to 6 000 higher for the month of June, even 10 000 vehicles higher, had the tourism industry been in full swing,” he said.

Botha said the other issue impacting on sales was the continuing supply chain problems caused by the disruption to semiconductor or microchip supplies.

“There is still a delay in those chips being delivered and still a delay in vehicles getting into showrooms. If you go around to showroom floors, they are maybe a half or a quarter full.

“There is more demand than there is supply currently. We can even see it in the take-up rates of finance, where people are applying for loans but they don’t get the vehicle in the same month that they apply for finance,” he said.

Botha added that finance applications were higher but he was unsure if this was because consumers were more interested in buying a vehicle or were applying at multiple dealerships because they were first applying for finance before buying.

However, Botha said the approval rate of vehicle finance applications was not at the level it was in 2019 but definitely not at the levels forecast in the middle of last year.

“We thought the approval rate would be way lower,” he said.

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