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Vehicle sales slowdown to continue into 2017 – Experts

Vehicle sales slowdown to continue into 2017 – Experts

With oil prices expected to be between US$50 and US$60 in 2017, Simonis Storm financial services expects the overall vehicle sales to be under pressure.

According to SSS, the fuel hiking cycle is already in force and running as the Ministry of Mines and Energy increases petrol and diesel prices by 20 and 30 cents per litre in January 2017.

Transport inflation is likely to affect the purchases of both new and second hand vehicles into 2017,” they added.

The view from SSS came following this week’s announcement of local new vehicle sales statistics for the month of December 2016 by the National Association of Automobile Manufacturers of South Africa (NAAMSA).

According to the statistics total new vehicle sales stood at 16 598 units, which is down 22.8% in comparison to 19 661 units recorded during the same period in2015.

Total vehicle sales contracted by 19.1% month on month in December 2016, after a recorded recovery of 13.8% recorded in November 2016. The decline in new vehicle sales can be attributed to an increase in all vehicle categories but Buses remained constant.

According to NAAMSA on an annual basis, Light Commercial, Passenger, and Heavy Commercial Vehicles continued to contract by 32.2%, 28.3% and 85.7%, respectively. Furthermore, Medium Commercial and Extra Heavy Commercial Vehicles also fell victim to a negative annual growth by 28.0% and 25.0% in December 2016 after recording positive increases of 25.0% and 34.5%, respectively in November 2016.

The suggested aggregate value of new vehicle sales stood at N$429.5 million during December 2016 compared to N$537.2 million recorded in the prior month. The value of new vehicle sales during the month under review declined by 20.0% monthly and by 25.6% yearly, NAAMSA added.

Meanwhile, IJG Reasearch said 2016 was not a particularly good year for new vehicles as December numbers brought the year to a disappointing close.

The slowdown was driven by two main factors. Firstly, the reduction in government spending had a direct and indirect effect on the demand for new vehicles. Both direct orders from government and the weaker economic environment have reduced the demand for capital goods,” IJG reported

Secondly, higher interest rates and amendments to the Credit Agreement Act (which requires a deposit of 10% on all vehicle loans and limits repayment periods to 54 months) have reduced the availability of credit used to purchase these capital goods,” they added.

IJG expects the slowdown to continue into 2017 and lower government spending on capital expenditure should also put pressure on vehicle sales for the foreseeable future.

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