However, there is optimism that a widely expected imminent reduction in interest rates will help to boost new vehicle sales in the months ahead.

Naamsa CEO, Mikel Mabasa, said the stronger July 2024 new vehicle market could not be sustained last month but the volume passenger car segment encouragingly trended upward over the past two months.

Mabasa said there was recognition that with interest rates at a 15-year high, two potential rate cuts before the end of the year, reducing the cost of borrowing, would not materially improve vehicle affordability challenges and household debts over the short term, but it would signal a positive shift to stimulate economic activities.

“Since the downward slope in new vehicle sales commenced in August 2023, expectations remain that the new vehicle market will reflect an improved performance for the balance of the year owing to the 2023 lower base-month effect comparisons,” he said.

National Automobile Dealers Association’s (NADA’s) national chairperson, Brandon Cohen, expressed optimism about the potential for an interest rate cut to stimulate the market.

“A reduction in interest rates could significantly benefit the South African retail motor industry and the broader economy," he said.

Cohen believes that with inflation declining to 4.6% in August 2024 and further improvements anticipated that “a rate cut seems imminent when the Reserve Bank’s Monetary Policy Committee meets later this month”.

He added that the Monetary Policy Committee could take direction from the Federal Reserve in the United States, where the chairman has indicated that a rate cut is likely.

Cohen added that while interest rate changes typically take three to six months to impact consumer purchasing patterns, the current pent-up demand may lead to a quicker response in the local market.

He said it would be interesting to see how many people take advantage of the two-pot retirement system, which was effective from 1 September 2024, to access their savings within prescribed limits.

“If the numbers are close to predictions, this could inject anywhere between R10 billion and more than R100 billion into the economy,” he said.

Cohen acknowledged that while this could have a significant short-term impact by increasing spending or debt repayment, it could also have longer-term consequences.

“The two-pot system withdrawals might offer a temporary boost to the economy but could be detrimental in terms of long-term worker security,” he said.

Figures released on Monday revealed that aggregate domestic new vehicle sales dropped to 43 588 units last month from the 45 854 vehicles sold in August 2023.

Overall, of the total reported industry sales of 43 588 vehicles, an estimated 81.5% or 35 503 units represented dealer sales, 12.4% sales to the vehicle rental industry, 3.3% sales to government, and 2.8% sales to industry corporate fleets.

Sales of new passenger vehicles improved by 3.1% to 30 022 units last month from the 29 131 units sold in August 2023.

Vehicle rental industry sales accounted for 16.7% of new passenger vehicles sales during the month.

Sales of new light commercial vehicles, bakkies and mini-buses declined year-on-year by 21.5% to 10 709 units last month while medium commercial vehicle sales increased by 8.1% to 748 units and heavy truck and bus sales dropped by 11.4% to 2 109 units.

AVAF Infographic August 2024