NADA sees green shoots ahead

The slump in new vehicle sales last month has been attributed by the National Automobile Dealers’ Association (NADA) to the uncertainty and dent to business confidence created by the delayed announcement of the Cabinet of the Government of National Unity (GNU) following South Africa’s general elections.

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Brandon Cohen, the chairperson of NADA, says South Africa had a free and fair election, with the ANC losing its majority for the first time in its 30-year rule but, unlike most other liberation movements on the continent, they transitioned peacefully to a GNU and power-sharing model.

“What a historic occasion this is and what a testament to real democracy," he says.

"This approach to governance will hopefully bring much-needed stability to the country," he adds.

However, Cohen says that despite this significant political progress, June was another unsettled month for South Africa, with the delayed announcement of the GNU's cabinet impacting local business confidence and consumer decision-making on major purchases.

Cohen says this sentiment was reflected in the latest vehicle sales statistics, which showed a further slowdown in vehicle sales.

“It is tough out there,” he says, “the few green shoots we saw after the elections dried up owing to the time it took to appoint the Cabinet. The taxi market is slowly starting to recover, as sales over the past few months dropped from around 1 400 a month to almost zero.

“This decline is owing to banks being risk-averse in this sector. This cautious approach has extended across the industry, with approval rates remaining under pressure.

“Additionally, the trend of approved loans not being taken up by consumers has increased, reflecting a lack of confidence in the market," he says.

Cohen added that in the heavy vehicle space, banks are also reluctant to finance heavy vehicles and most of the bigger operators are not purchasing at all.

“Conversely, the used vehicle market continues to show an increase in demand, with a definite trend of buying down, negatively influencing new vehicle sales,” he says.

Overall, the new vehicle market fell by 14% to 40 072 units compared to June 2023.

Out of the total reported industry sales, an estimated 82.5% or 33 039 new vehicle sales represented dealer sales.

Cohen says the new vehicle industry will have to wait a while to gauge the effect of the new government but indicated that there have been several positives of late that will help boost the economy.

“These include more than three months of no load-shedding, with another 800MW being added to the grid from the Kusile power station last week.

“Additionally, the rand has recovered against the dollar [and is] now hovering between R17.90 and R18.20 compare to over R19 when the election results were announced.

“This recovery bodes well for inflation, which remains sticky and has needed good news in the market," he says.

Cohen added that Standard Bank is predicting up to two rate cuts in the remainder of 2024. If it happens, it will be immensely positive to encourage growth and stimulate consumer spending.

“Dealers are the face of the industry and deal with consumers directly, so we have a unique understanding of the financial pressures consumers are under and the issues they face.

“We do still have our ongoing longer-term battles like crime, corruption, as well as utility supply constraints, but all signs are pointing to a brighter second half of the year for consumers and dealers alike,” he says.

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