New vehicle sales fall in March as high interest rates cut consumer buying power

New vehicle sales fell 0.6% in March to 50 157 units as interest rate hikes started to impact consumer decisions to buy a new car, and the motor industry was affected by the national shutdown, the Automotive Business Council said yesterday.

“The South African Reserve Bank interest rates increase by 50-basis point to 7.75% repo rate, and prime lending rate at 11.25%, is already having an impact on a shrinking disposable income purse many consumers rely on when making new vehicle sales decisions,” Naamsa chief executive Mike Mabasa said yesterday.

"For many South African households, buying a brand-new car is the second most important investment. The possibility of continued increases in interest rates would likely have a negative impact on already severely financially constrained consumers’ [ability to afford] to purchase vehicles and/or to service their car loan repayments," he said.

The Human Rights Day holiday and the national shutdown on March 20 had also affected sales and exports, with many dealers opting to close shop, and vehicle manufacturers operating in hotspot metros also halting production during the shutdown.

Overall, out of the total reported industry sales, an estimated 43 801 units, or 87.3%, were dealer sales, some 6.1% represented sales to the vehicle rental industry, 4.1% to government, and 2.5% to industry corporate fleets.

The new passenger car market declined 6.4%, at 31 631 units compared to the 33 788 new passenger cars sold in March last year. Dealerships supported the new passenger car market for March 2023 and accounted for 85.9% of sales.

Export sales increased by 1 026 units, or 3.1%, to 34 134 units in March this year, compared to the 33 108 vehicles exported in March last year.

Year-to-date vehicle exports at 84 774 units were 4.2% below the level of the same period in 2022. The month-on-month export sales reflected an increase of 3 922 units, or 12.9%, for March 2023.

Naamsa said that while vehicle production was ramping up and the overall performance of vehicle sales and exports sales had been steadily increasing, continued monetary policy tightening, domestic and global slowing growth, as well as energy shortages, would have greater spill-over to the overall performance of the industry this year.

“This being said, Naamsa remains upbeat about our forecast for domestic sales to grow by 6.3% for 2023, and export sales to grow by 8.3% for the year.”

Domestic sales of new light commercial vehicles, bakkies and minibuses at 15 529 units during March 2023, increased by 1 556 units, or 11.1%, from the 13 973 light commercial vehicles sold during March 2022.

BUSINESS REPORT