Different interpretations have been put on the 3.1% year-on-year decline in new vehicle sales in August 2023 and 6.7% or 2 064-unit reduction in new passenger car sales in the month.
The National Automobile Dealers’ Association (NADA) says the South African new vehicle market has demonstrated its resilience in the face of ongoing economic downturns for several months but in August 2023 it could no longer withstand the pressure from a variety of negative factors.
NADA says these factors included increasing interest rates, fuel prices, vehicle costs and a significant decrease in household spending ability owing to the rising cost of living, resulting in lower disposable income for consumers.
NADA’s national chairperson, Brandon Cohen, says the resilience of the South African retail motor industry in 2023 continues to astound dealers but they knew there had to be a tipping point and “this is what happened in August”.
Cohen says interest rates currently represent the most significant obstacle to vehicle sales.
“Not only do they strain individuals with existing financial commitments, resulting in higher debt instalments, but each increase in rates also changes the affordability model for consumers in terms of the maximum rand value for which they can secure approval for a loan at a financial institution.
“When we factor in new car pricing and the negative impact of a weak rand, we witness a perfect storm of reduced affordability in a market with fewer and fewer cars available in various price brackets," he says.
Cohen added that downsizing is a significant factor in the current economic environment.
He says expected retail sales of luxury vehicle brands this year compared to 2022 indicate that this segment is under considerable pressure and that this is unlikely to change in the near term.
“I believe we need to be realistic. Although there is still demand, albeit under pressure, we must acknowledge that the current economic conditions are very challenging.
“Fortunately, the financial institutions have not ceased funding as they did during the global financial crisis, and mobility remains essential for most South Africans.
“Therefore, there are generous special offers and other incentives in the market for consumers, while interest rates appear to be stable and are unlikely to rise further,” he says.
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