New vehicle sales on downward spiral, decreases 6% in January
Despite low oil prices and an increase in retail margins, vehicle sales are expected to remain under pressure in 2020 as new vehicle sales showed further decline by 6% to 671 units in January 2020.
According to the National Association of Automobile Manufacturers South Africa, this is the lowest in Namibian vehicle sales since 666 units recorded in January 2019. Meanwhile, Simonis Storm Securities expect annual vehicle sales to decrease by a smaller margin of 2.8% in 2020.
“The assumption is based on continuous weak economic growth, low disposable income and lower spending, which are expected to prevail in 2020,” Indileni Nanghonga, junior analyst at Simonis said.
All vehicle categories declined on a monthly basis, except for buses. Passenger vehicles declined the most (to 291 units in January), while light commercial vehicles remained stable at 335 during the period under review.
Medium commercial and heavy commercial vehicles both declined by 33.3% to 14 units and 6 units, bringing the total commercial vehicle sales down by 10%. Nanghonga views this as business confidence, especially in the vehicle sector, remaining sluggish.
“We expect economic growth to advance by 0.9% in 2020, which should provide some stimulus to consumers and in turn revives hope to the dealerships,” Nanghonga said.
Furthermore, petrol prices remained unchanged over time mainly on the back of fixed levels of fuel inventories in 2019. Fuel pump prices for the month of February were left unchanged, with 95 octane unleaded petrol at N$13.05 per litre and diesel at N$13.63. Moreover, the Ministry of Mines and Energy has increased the dealer’s margins by 4 c/l to 110 c/l since the 5th of February 2020.
Moderate inflation and low global oil prices will continue to benefit retailers and consumers (in the transport industry) in the first half of this year. Global oil prices dipped in February 2020, due to the threat on demand as a result of the coronavirus outbreak in China.