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Changing gear: South Africa’s new car sales rebound i...

Business Maverick

BUSINESS MAVERICK

Changing gear: South Africa’s new car sales rebound in May

A worker carries out a quality-control inspection inside the boot area of a VW Polo on the production line at the Volkswagen plant in Uitenhage. (Photo: Waldo Swiegers / Bloomberg via Getty Images)

New car sales rebounded in May after falling sharply in April – a month hampered by holidays – data from the Automotive Business Council showed this week. It is a tentative sign that low interest rates are lending some support to the economic recovery, but sales still remain below March levels.

New car sales in May reached 38,337 units, a rise of more than 7% on a monthly basis compared with April. That is a sign of renewed momentum after a month that lost some sales because of public holidays, but high gear has not yet been hit. 

In April, new car sales fell more than 17% from the 43,428 units sold in March. Who knows… maybe there was a lot of tender money floating around in March. 

Compared with last year, of course, sales have surged. They rose almost 200% from the 12,874 vehicles sold in May 2020 – a month when the economy was contracting at a rapid pace and lockdown restrictions were still severe. 

NKC African Economics points out in a commentary on the data that May 2019 – the “pre-pandemic year” – is more instructive for comparative purposes. Viewed in that light, new car sales in May this year were down 5.2% compared with the same month two years ago. That is not a car smash, but it indicates that demand levels have not reached pre-pandemic levels. 

“Actual levels indicate that consumers are willing to spend and to take advantage of the low interest rate environment at the moment,” NKC noted. 

The Reserve Bank slashed rates by 300 basis points last year to historic lows. One suspects that if rates were higher, car sales would be more sluggish. A lot of cars in South Africa are bought on credit.  

The Automotive Business Council said in a statement that CEOs in the sector  “are mainly positive of a robust recovery in the domestic as well as the global new vehicle markets over the next six months, as the domestic and international markets rebound from the low base of 2020”. 

“However, structural constraints in the economy… continue to curb a potential quick recovery to pre-Covid-19 levels.” 

When new car sales get back to or surpass 2019 levels, then the sector will truly be in a higher gear. DM/BM

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