Interest Rate Hike Dampers March Vehicle Sales

Strike action and another interest rate hike put the dampers on new car sales in March, with the month closing 308 units down on the same month in 2022 as buyers held back or deferred purchases – however, commercial vehicle sales grew slightly.

According to naamsa | The Automotive Business Council, the South African Reserve Bank interest rates increase by 50-basis point to 7,75% repo rate and prime lending rate at 11,25% impacts a shrinking disposable income purse many consumers rely on when making new vehicle sales decisions.

The continued increase in interest rates will likely negatively impact the already severely constrained affordability to purchase vehicles or service their car loan repayments.

Coupled with the effects of interest hikes and the Human Rights Day holiday, the new vehicle sales and export sales modest performance was also impacted by the National Shutdown on 20 March 2023, as dealers closed shop and vehicle manufacturers in metros also halted production. 

Aggregate domestic new vehicle sales for March were 50 157 units, of which an estimated 43 801 or 87,3% represented dealer sales, an estimated 6,1% sales to the vehicle rental industry, 4,1% to the government, and 2,5% to industry-corporate fleet.

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.

Sales for medium and heavy truck segments of the industry reflected an impressive performance for March 2023, recorded at 870 units and 2 127 units, respectively, which is a 10,1% in the case of medium commercial vehicles, and a 213 increase, in the case of heavy trucks and buses or 11,1%, compared to the corresponding month last year.

Notwithstanding the geographical disparities in the global pace of New Energy Vehicles transformation, the SA automotive industry, like all other car production markets globally, is undergoing an exciting industry re-invention and transformation cycle marked by carbon neutrality goals and cutting-edge technology and an electrified propulsion moment for transportation. 

The following table summarises the New Energy Vehicles annual aggregate industry sales in SA by the market for the past 5 years, including YTD February 2023:

“In addition to making existing linked finance agreements more expensive, the higher-than-expected interest rate hike will no doubt challenge affordability and future purchase decisions for the new vehicle market, which could begin impacting sales volumes over the coming months,” says Lebogang Gaoaketse, Head of Marketing and Communications at WesBank.

Toyota South Africa Motors (TSAM) continued to lead domestic vehicle sales, racking up 13 406 sales of the 50 157 units sold locally in March. This translates to a market share of 26,7%, topping the charts in Passenger, Light Commercial Vehicle (LCV), Medium Commercial Vehicle (MCV) and Heavy Commercial Vehicle (HCV) segments.

“Despite another month of reduced trading days, we were delighted by the resilience shown in the market. Traditionally, March tends to be a good barometer of vehicle-sales momentum heading into the second quarter, and in this respect, we are very optimistic for the rest of the year,” says Senior Vice President of Sales and Marketing at TSAM, Leon Theron.

Gary McCraw, National Director of the National Automobil Dealers Association (NADA), added: “March was a month of uncertainty with the Human Rights public holiday and the threat of a protest on the day preceding it. The fact total sales exceeded the 50 000-unit barriers was a positive sign, showing that there is still ongoing, pent-up demand for new vehicles."

It is worth noting that the 50,000 mark has been surpassed only twice since October 2019, now in March 2023 and March 2022.

With companies entering a new financial year, the expectation is for them to start buying again. Ongoing load-shedding and changes in company policies are pushing workers back to the office instead of working from home, which means they are driving daily, thus spurring new car sales.