Stronger than expected January sales point to a better 2022

The new passenger car market registered an impressive increase in sales in January 2022, growing by 26.6% to 30 037 units from the 23 732 new cars sold in the corresponding month in 2021.

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Total domestic new vehicle sales in the month increased by 19.5% to 41 382 units from the 34 639 vehicles sold in January 2021.

Mikel Mabasa, CEO of automotive business council, naamsa, says the new vehicle market started the year off on a very positive note and continued on its gradual recovery path to pre-COVID-19 levels.

Of the total reported industry sales, an estimated 84.2% or 34 863 units, represented dealer sales, 12.1% sales to the vehicle rental industry, 2.4% sales to government and 1.3% sales to industry corporate fleets.

Mabasa says the car rental industry supported the new passenger car market during the month and accounted for a noteworthy 15.3% of car sales in January 2022.

Domestic sales of new, light commercial vehicles, bakkies and minibuses rose by 3.8% to 9 629 units from the 9 280 units sold in January 2021.

However, sales of medium commercial vehicles declined by 4.3% to 465 units, while heavy truck and bus sales improved by 9.6% to 1 251 units.

Nedbank’s group economic unit says although a recovery in the new vehicle market is underway, total sales remain below pre-crisis levels.

It says sales volumes are 10.8% lower than the 2017-2019 January average and 3.7% lower than 2019 levels.

The unit says local vehicle sales started the year on the front foot, with a moderate recovery expected throughout the year.

However, it says downside risks emanate from the ongoing parts shortages, supply chain inefficiencies, freight costs and the resurgence of new COVID-19 variants.

“Domestically, high inflation, rising interest rates and a weak labour market will keep business and consumer confidence tepid,” it says.

Mabasa says that in line with the moderate economic growth forecast for the country for 2022, the new vehicle market is expected to continue its gradual recovery to pre-COVID-19 levels, but at a slower pace.

He referred to the 0.25 percentage point increase in the repo rate by the Reserve Bank at its January meeting, the second increase since the November 2021 meeting of its monetary policy committee in its drive to keep inflation expectations well anchored.

Mabasa says inflation has been fuelled by, among other things, record-high fuel prices, rising food and energy costs and the depreciating exchange rate of the rand.

“Consumer and business sentiment will therefore remain under pressure over the short to medium term while supply chain disruptions, such as the global shortage of semiconductors, will also continue to hamper new vehicle sales and production during the year.

“On the positive side, the new vehicle market trend over the next three years is expected to be upward, in close correlation with National Treasury’s projected domestic economic growth outlook, averaging 1.7% for 2022, 2023 and 2024,” he says.

Export sales declined by 9.3% to 19 089 units from the 21 051 vehicles exported in January 2021.

However, Mabasa says prospects for vehicle exports for 2022, despite declining during the month, remain positive in line with favourable economic and market conditions abroad and on the back of further new model introductions by major vehicle exporters in the country in 2022.

Click here to read more: AVAF Infographic NAAMSA January 2022

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