New vehicle sales slump continues in South Africa – WesBank report
Affordability woes hit new vehicle market as prices rise and interest rates remain high.
WesBank’s latest report has highlighted ongoing struggles in the South African new vehicle market, with year-on-year sales declining by 14%. Affordability appears to be a key culprit, driven by a 4.7% increase in new car prices during the first quarter of 2024 compared with last year (TransUnion SA Vehicle Pricing Index). This is further compounded by rising interest rates, with limited relief expected until the latter half of the year.
WesBank’s data reflects this challenge, with the average loan amount for a new car rising by 3.5% in June. Additionally, the average loan term (up 3.8% to over 51 months) and contract period (over 73 months) have increased year-on-year.
“These trends indicate affordability issues,” says Lebo Gaoaketse, head of marketing and communication at WesBank. “Consumers are either holding onto their existing vehicles for longer or extending loan terms to manage repayments.”
High interest rates remain a major factor impacting affordability. Consider a June average loan value of R410 000 at the current prime lending rate (11.75%). This translates to an estimated monthly instalment of R8 054.83. Compared to a 2020 loan with a prime rate of 7% for the same car value, monthly payments would R1 015.81 lower. Over the entire loan term, this equates to roughly R75 730.32 more for the same car at today’s rates.
“When you factor in other rising living costs,” says Gaoaketse, “it’s no surprise that household budgets are under strain. Consumers are exploring alternative mobility solutions like ride-sharing, pre-owned cars, or simply delaying purchases altogether.”
WesBank predicts car sales will remain under pressure until interest rates fall. The Automotive Business Council confirms this trend, reporting a 14% year-on-year decline in national sales to 40 072 units. While there’s an 8% increase compared with the previous month (2 967 units), the overall picture remains concerning.
Passenger car sales dropped 9% to 26 928 units, and light commercial vehicles saw a steeper decline of 24.3% (10 552 units).
With five out of six months experiencing a significant decline, the first half of 2024 paints a bleak picture for the industry. Year-to-date sales are down 7.4% at 246 052 units, raising concerns that the market might not reach 500 000 units this year.
“Vehicle price inflation, high interest rates and a rising cost of living are all roadblocks for new car buyers,” concludes Gaoaketse. “Without a significant shift in these factors, the new car market will likely face continued pressure.”
Source: MotorPress/WesBank
