Mikel Mabasa, the CEO of automotive business council, naamsa, admitted this in the quarterly business review of business conditions for the country’s motor vehicle manufacturing industry during the second quarter of 2024.

However, the steep increase in new energy vehicles (NEVs) continued in the second quarter of 2024.

Mabasa said the declining trend in the new vehicle market, which commenced in August 2023, continued into the first half of 2024 and signalled “a constrained new vehicle market accompanied by an affordability crisis”.

He said weaker new vehicle sales during the first quarter 2024 were aligned with an economy that contracted by 0.1% while sales deteriorated further during the second quarter 2024 as national election jitters also impacted market sentiment.

However, Mabasa said the performance of the new vehicle market during the first half of 2024 was in line with the industry’s expectations of a year of two halves, consisting of a taxing first half “but improved prospects for the second half of the year once the interest cutting cycle commences”.

Mabasa said NEV sales by 18 industry brands increased by 169.8% from 1 528 units in the second quarter 2023 to 4 122 units in the second quarter 2024, following an 88.2% increase during the first quarter 2024 compared to the first quarter 2023.

He said this followed a significant year-on-year increase in NEV sales of 421.7% from 896 units in 2021 to 4 694 units in 2022, with NEV sales increasing by a further 65.8% to 7 783 units in 2023.

“NEV sales breached the 1% mark for the first time in 2023, comprising 1.45% of the total new vehicle market compared to 0.88% of total new vehicle sales in 2022,” he said.

The naamsa quarterly business review revealed that traditional hybrid vehicle sales accounted for the bulk of total NEV sales in the second quarter of 2024 at 3 543 units compared to 1 167 units in the first quarter of 2024.

Traditional hybrid vehicle sales totalled 6 518 units in 2023, 4 070 units in 2022 and 627 units in 2021.

By comparison, plug-in hybrid vehicle sales totalled 160 units in the second quarter of 2024 and 91 units in the first quarter of the year compared to total sales of 336 units in 2023 and 122 units in 2022.

Electric vehicle (EV) sales in the second quarter of 2024 totalled 419 units compared to 270 unit sales in the first quarter of the year and 929 unit sales in 2023 and 502 units in 2022.

Mabasa said the introduction of an investment allowance for new EV investments, as announced in the February 2024 Budget Review and which is set to commence in March 2026 “is a crucial step in attracting investments, fostering innovation and enhancing the growth of the sector within South Africa”.

The investment allowance will allow manufacturers to claim 150% of qualifying investment spending in the first year.

“An electric vehicle stimulation policy is something the sector has been working towards for some time.

“As South Africa’s most successful non-commodity manufacturing industry, it is critical to the domestic economy that the automotive industry achieves its potential through 2035,” he said.