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South African motor industry shifts gears — new car s...

Business Maverick

VEHICLE MARKET

South African motor industry shifts gears — new car sales and exports rise in February

(Photo: Waldo Swiegers / Bloomberg via Getty Images)

New vehicle sales in South Africa rose sharply in February, as did the exports of vehicles made here. This is good news on both the retail and manufacturing fronts and suggests South Africa’s economic rebound is gaining traction. But the climb from here may be an uphill one as petrol prices soar, interest rates rise and Russia’s war in Ukraine threatens further supply chain upheaval.

The pandemic and the lockdowns to contain it suppressed vehicle demand in South Africa and abroad. But what was once bottled up is now coming uncorked.

Data released on Tuesday by the Automotive Business Council, also known as Naamsa, showed that new car sales in February in South Africa leapt 18.4% to 44,229 from the 37,369 vehicles sold in the same month last year. Compared with the previous month — when sales were almost 20% higher compared with January 2021 — sales rose 7%. 

In the year to date, new car sales are up in the same period in 2021 by 18.8% to 85,559. New rubber hitting the road is an indication that the economy is shifting gears. 

Sales of new electric or hybrid cars have also been surging, off a very low base. The data on this front is a month behind, showing a 535% jump in January 2022 to 216 from the 34 sold in January 2021. 

The vehicle manufacturing sector in South Africa is also gaining traction. 

“Export sales, encouragingly, also recorded an increase of 3,590 units, or 12.3%, to 32,867 units in February 2022 compared to the 29,277 vehicles exported in February 2021,” Naamsa said. 

Compared with the previous month — when exports declined on an annual basis by more than 9% to 19,089 — the increase in exports was a whopping 72%. In the year to date compared with the first two months of last year, the rise is a far more modest 3%. 

There are a number of factors at play here. South African consumers are clearly showing more confidence if they are buying more new cars, perhaps in some cases from savings accumulated, in others because of rising income. The low interest rate environment has made borrowing more affordable and there is some tax relief on the horizon.

On the manufacturing and export side, worldwide demand is seen picking up as the global economy recovers at a time when supply chain challenges have often prevented consumers from buying the models they desire. 

As cars roll off the assembly lines, they are being snapped up. This bodes well for South Africa’s manufacturing sector and is in line with other indicators, such as the Absa Purchasing Managers’ Index, which rose again in February. 

Still, the climb from here could be uphill and steep. 

“The automotive industry in South Africa is concerned about the escalating geopolitical tensions due to the Russian invasion of Ukraine. The current hostilities pose another potential global supply chain challenge for the auto industry because of Europe’s strategic significance to the global automotive ecosystem,” Naamsa said in a statement. 

Retail petrol prices in South Africa will also hit record highs from Wednesday at more than R21 a litre, while interest rates have been rising from record lows and could climb faster, in part because of the fuel shock. These trends could put a brake on domestic demand for new car sales while the full economic consequences of Moscow’s war remain unknown. 

The sector may be at a crossroads. Does it buckle up for a bumpy ride ahead or is it about to fire up its engines? DM/BM

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