New vehicle sales continued to establish firmer ground, recording the third consecutive month of growth since the start of lockdown on 27 March in South Africa. The slow resurgence of sales comes off the back of reduced lockdown level regulations as the country entered Level One during September.

Year-on-year results for the past three months have shifted from 29.6% in July, through 26.3% in August, to a market down 23.9% in September.

According to the National Association of Automobile Manufacturers of South Africa (Naamsa), 37 403 new vehicles were sold during September, up 3 888 units from August.

Naamsa, however, has expressed concern about the impact of grey imports in South Africa.

It is estimated that about 300 000 of the 12.7 million cars on our roads are illegally imported vehicles with the number of grey imports is growing at 30 000 vehicles per annum.

Grey imports costing fiscus R3.8bn

Without doubt, grey imports displaces new car sales. Based on the suite of taxes applicable to new car sales locally, Naamsa estimates that this is costing the fiscus R3.8 billion per annum.

Grey imports have a negative impact on the automotive ecosystem because they rob the fiscus of the much-needed tax revenue; they hurt job creation; they aid criminal activity; and undermine road safety initiatives.

To put into perspective, the monthly average new vehicle market for 2020 is 28 500 units. Grey imports represent an extra month’s sales per annum, which represents 7.5% of total market and would be the third-largest brand in South Africa by volume.

Naamsa breakdown: September 2020 new vehicle sales

Reflecting on the new vehicle sales statistics for the month of September 2020, Naamsa confirmed that aggregate domestic sales at 37 403 units continued to improve in line with lower lockdown levels over recent months, but still reflected a decline of 11 737 units, or 23.9% from the 49 140 vehicles sold in September 2019.

Export sales at 28 704 units also registered a fall of 7 566 units or a decline of 20.9% compared to the 36 270 vehicles exported in September 2019.

Overall, out of the total reported industry sales of 37 403 vehicles, an estimated 33 080 units or 88.4% represented dealer sales, 5% sales to government, an estimated 3.7% represented sales to the vehicle rental industry, and 2.9% to industry corporate fleets. 

The September 2020 new passenger car market at 22 798 units had registered a decline of 10 322 cars or a fall of 31.2% compared to the 33 120 new cars sold in September 2019.

The car rental industry accounted for a welcomed contribution comprising 5.7% of car sales in September 2020.

Domestic sales of new light commercial vehicles, bakkies and mini-buses at 12 267 units during September had recorded a decline of 1 202 units or a fall of 8.9% from the 13 469 light commercial vehicles sold during the corresponding month in 2019.

Sales for medium and heavy truck segments of the industry reflected a weak performance and at 680 units and 1 658 units, respectively, showed a decline of 110 vehicles or a fall of 13.9% in the case of medium commercial vehicles, and, in the case of heavy trucks and buses, a decline of 103 vehicles or a fall of 5.8% compared to the corresponding month in 2019.

Decline of 37.5%

The performance for the year to date now reflected a fall of 37.5% compared to the level of the same period in 2019.

However, business conditions remain far from normal and the new vehicle market is expected to remain under pressure in the current economic scenario. For the year to date, the new vehicle market has now contracted by 33.4% or 132 878 units compared to the corresponding period in 2019.

In contrast to actual sales activity, WesBank Vehicle and Asset Finance data indicates an increase in applications compared to September 2019. 

“Whether it remains pent-up demand or merely more consumer and business optimism in the market, there are reassuring levels of demand,”   said WesBank Vehicle and Asset Finance head of marketing amd communication  Lebogang Gaoaketse. 

“While this isn’t currently translating into sales, it bodes well for the continued recovery of the market as affordability slowly improves.”

Tax reduction could stimulate new vehicle sales

An important avenue for government to support this key coronavirus-hit sector of the economy is to reduce taxes on new vehicle purchases to stimulate new vehicle sales. Combined with record low interest rates and low inflation, the automotive industry and the economy in general could hugely benefit should the tax burden on vehicles be reduced during this time.

Vehicle export numbers continue to recover to some extent as the automotive industry’s major export destinations are starting to ease their lockdown restrictions. Going forward, South African vehicle exporters will be required to consider various scenarios for the world economy and global trade patterns in the short to medium term

Onlineautos
Author: Onlineautos