Economic fuss pressures vehicle sales
Economic analysts earlier this week attributed the contraction in new vehicle sales to the backdrop in the local economy.
This comes after the National Association of Automobile Manufacturers of South Africa (NAAMSA) released Namibia’s monthly new vehicle sales statistics for the month of October 2016. New vehicle sales contracted by 7.5% month on month to 1,157 units compared to an 8.5% contraction recorded in the prior month.
“Vehicle sales have seen serious contraction in 2016 for several reasons. Firstly, higher interest rates have decreased spending on capital goods, which are normally financed by credit. Secondly amendments to the credit act were enacted with the specific aim of discouraging spending on unproductive goods by requiring a 10% deposit. Lastly and most importantly, government spending on both salaries and capital goods have been cut to the bone in the most recent medium term budget review,” researchers at IJG Securities stated.
Going forward, IJG expects the slowdown to continue, adding that the interest rates may rise further, should a credit rating downgrade in South Africa or Namibia materialise. “The adverse effects of lower government spending on capital expenditure should also put pressure on vehicle sales for the foreseeable future,” IJG further stated.
On an annual basis, total vehicle sales contracted by 34.5% compared to -15.5% registered in the prior year. The new vehicle sales number recorded in October was the lowest level since February 2013 when 1,140 units were recorded. “We expect new vehicle sales to continue its downward trend due to the current economic backdrop and state of the Fiscus. The increase in the fuel levy by the Ministry of Finance coupled with the newly introduced Carbon Emissions tax and slowing Private Sector Credit Extension will continue to subdue vehicles sales in the country,” Director of Research and Securities at Simonis Storms Securities, Purvance Heuer said.
During the midterm budget review, the Minister of Finance suspended 13.5% of the amount allocated to vehicles to N$147 million, which suggests a slowdown in the consumption of new vehicle sales by the government.