Pent-up demand keeping market afloat - NADA

Pent-up demand is helping to keep South Africa's new vehicle market afloat in 2022, says the National Automobile Dealers’ Association (NADA).

Alex Boavida blue car

Alex Boavida, Vice Chairperson of NADA, said new car buyers who held off purchases during the COVID-19 pandemic over the past two years are now renewing their vehicles thanks to a somewhat normalised retail environment.

“Franchise dealers are noting a trend in the age of vehicles being traded in on new ones.

“Historically, the average age of vehicles exchanged for new models is around three or four years in line with normal ownership cycles.

“In recent months, however, dealers have seen this age increase to five or six years, which indicates some pent-up demand during the pandemic is finally being satisfied after delayed renewals,” she said.

Total new vehicle sales increased last month by a modest 2.1% year-on-year to 39 177 units from the 38 358 units sold in May last year.

Sales of new passenger cars increased in May 2022 by 13.8% year-on-year to 27 437 units while sales of new light commercial vehicles, bakkies and mini-busses slumped by 22.6% to 9 221 units.

Automotive business council, naamsa, attributed the sales performance to the knock-on effects of the disruptions caused by the severe floods in KwaZulu-Natal and a myriad of headwinds increasingly impacting domestic economic growth and the disposable income of consumers.

However, Boavida said it was encouraging to see the market performing so well despite the numerous setbacks the motor industry was facing both globally and locally.

Boavida said the appetite for new cars remained remarkably strong despite interest rate hikes and rising fuel prices, resulting in the budgets of consumers being hit from all angles.

She said brands offering more affordable product ranges were providing a crutch to the overall industry with aggressive pricing and the ability to deliver, thanks to more robust supply levels.

However, Boavida said many customers who normally bought in the mid- and premium segments were now buying down, not only to preserve budgets but because this was where the greatest variety could be found.

Boavida said sales to the vehicle rental industry contributed a substantial 3 090 units to the total sales in May.

Commenting on the 22.6% year-on-year slump in light commercial sales (LCVs), Boavida said it was evident that the devastating floods in KwaZulu-Natal and the subsequent damage to Toyota South Africa’s stockyards played a role in the downturn.

“Toyota has said it expected stock issues for the next four months as a result. It appears that Ford and Isuzu have filled in the gap, however, with relatively positive LCV sales, indicating that the drop in May was a result of supply issues and not demand.

“Sadly, the global semiconductor and general parts supply shortages were still wreaking havoc in the industry and suffocating showroom stock levels around the world, particularly in the premium segment.

“It is difficult to predict when these constraints will ease but the general industry view is from 2023 onward,” she said.

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