New vehicle sales decline more than 30% from one year ago

Vehicle sales figures released by the National Association of Automobile Manufactures of South Africa indicate that vehicle sales are on a steep decline. Local stockbroking firm IJG believes the trend will continue for the foreseeable future quoting figures from the national budget to indicate that state purschases of vehicles will be 58% less this year compared to 2015.
According to IJG, a total of 1,350 new vehicles were sold during February, a drop of 2.8% from the January sales of 1389 and down 30.7% over February 2015, driven by a slowdown in both passenger and commercial vehicle sales.
At this point of the year, 2739 vehicles have been sold so far, down 25.2% on the comparable period of 2015.Commenting on the observation, IJG said, “we have seen exceptionally strong vehicle sales growth through 2014 and 2015, fueled by a strong consumer base supported by expansionary fiscal policy and real wage growth, but the latest figures show that this trend is losing momentum.”
Added IJG, “this declining growth rate of new vehicle sales suggests that we may see another contraction in new vehicle sale this year, only to a much larger extent than the slight decrease seen in 2015.
Sales of passenger vehicles rose by 11% month on month, from 546 in January to 606 in February. However, on an annual basis, total sales of passenger vehicles fell by 26.2%.
Commercial vehicle sales decreased 33.9% year on year to a sales figure of 744 vehicles, which was due to lower sales numbers of light and heavy commercial vehicles, slightly offset by an increase in sales of medium commercial vehicles.
On a monthly basis, commercial vehicle sales was 11.7% lower than in January, IJG observed.
IJG is also expecting a decline in the vehicles the government is expected to buy. “We expect to see a decrease in vehicle sales as purchases of vehicles by Government will be reduced this year. The Ministry of Finance has allocated N$426 million to vehicle purchases in the 2016/17 National Budget. This is N$592 million or 58.1% less than the N$1 billion that was spent on vehicles during the previous financial year.”
Concluded IJG, “further downside risks to this are rising interest rates which may limit marginal lenders from qualifying for financing as well as banking sector liquidity which may limit the amount of loans available to finance vehicle purchases.”