Despite the fact that South Africa’s new vehicle industry grew some 2,1% in March year-on-year, WesBank has warned that the “current political climate” may soon result in hiked prices and a slump in sales.
Rudolf Mahoney, head of brand and communications at WesBank, said that March’s growth was driven by sales through the dealer channel, where consumers are active.
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“March’s sales performance is indicative of the positive sentiment in the economy during the past month. There were a few contributing factors, including a strong rand and falling fuel prices,” explained Mahoney.
“Consumers had many reasons to feel confident enough to spend money, and this is immediately evident in the new vehicle sales.”
This was reflected in the demand for vehicle finance, with WesBank’s data showing year-on-year growth of 8% for new vehicle finance and average new vehicle prices reaching an all-time high (also 8% up year-on-year).
This strong demand for new vehicles was not at the expense of used vehicle sales either, where application volumes were 13,4% higher than the same time last year, according to WesBank. Consumers shopping in the used market during March were also spending 8,6% more on average than last year.
“However, this positivity is going to be short-lived. The current political climate has introduced massive uncertainty in all South African markets. Both business and consumer confidence have been shaken, and this will filter through to the ratings agencies as well,” said Mahoney.
In fact, on Tuesday evening, Standard and Poor’s placed South Africa’s credit outlook at junk status.
“The rand’s sharp decline has already wiped out the benefit of lower fuel prices, and if it continues to deteriorate, new vehicle prices will follow suit,” warned Mahoney.
