South Africa’s vehicle market continues to show positive growth, with sales expected to reach 2% year on year in 2018 at 568,000 vehicles, says Standard Bank Vehicle Asset Financing.
“The market is largely being driven by the lower and medium segments –and we expect strong activity to continue,” says Cyril Zhungu, head of dealer automotive retail at Standard Bank.
Derick de Vries Head of VAF and fleet management at Standard Bank, says medium and large commercial vehicle sales will continue to be driven by business sentiment.”
This follows the release of National Association of Automobile Manufacturers of SA (Naamsa) statistics today showing new vehicle sales at 42984 had shown an improvement of 1022 vehicles or 2,4% from the 41962 vehicles sold in May last year. May, 2018 aggregate export sales at 32731 vehicles reflected an improvement of 3982 units or a gain of 13,9% compared to the 28749 vehicles exported in May last year.
“Consumers have been able to deleverage their debt over the past 10 years since the financial crisis of 2008/9 and debt to income has dropped over that period,” says Zhungu. This has allowed consumers to continue participating in the credit market as affordability has improved and combined with lower price inflation is driving confidence.
Stable inflation, low interest rates, and sales incentives from manufacturers, together with improved confidence, continues to underpin the positive outlook.
Consumer confidence served to drive higher dealer sales, but it was notable that exports grew at 13.9% as demand remained strong from export markets.
The data showed that sales in the low volume medium and heavy truck segments of the Industry had rebounded strongly with a gain of 17.6% year on year,. Heavy trucks and buses showed a sharp improvement of 21.1% compared to the corresponding month last year.
Light commercial vehicles saw growth of 3.2% y/y, which is in line with expectations and confidence in the sector.
However, Zhungu pointed out that the recent increase in the oil price is a downside risk to the outlook given the impact to changes on motoring costs to the average consumer.
“Furthermore, the drift in cost inflation caused by oil prices, among others, will filter through into transport costs, which translates into a higher overall cost of living,” concludes Zhungu.
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