In November, South Africa’s new vehicle market saw another month of sales growth, with the final tally of 49 754 units up 7,2% year-on-year. Interestingly, as WesBank points out, a large chunk of this sales growth came from an “incredibly strong showing” in the rental channel, which saw a surge in year-on-year sales.
This is attributed to rental car companies re-fleeting ahead of the holiday season.
“It’s clear that the rental car companies are planning for a busy Festive Season, with sales growth in this channel up by nearly 3 000 units,” said Rudolf Mahoney, head of brand and communications at WesBank.
A closer look at the Naamsa sales statistics shows that an estimated 14,0% of the industry total of 49 754 units represented sales to the rental industry. In terms of new car sales alone (i.e., excluding commercial vehicles), the rental industry accounted for an estimated 19,8% in November, which means that one in every five new cars sold during the month represented a car rental sale.
Another growth driver was the passenger car dealer channel, which grew by more than 8% year-on-year.
“We cannot discount the strong sales showing for passenger cars in the dealer channel. This growth is attributed to three main factors: age, value and supply of used cars,” said Mahoney.
WesBank says its data shows that the current replacement cycle for new cars is at 44 months. This means many consumers are ready to replace their vehicles before service and warranty plans lapse.
For these buyers, WesBank says, the current marketing incentives from OEMs offer “excellent value” at a time when they are ready to replace their cars. Finally, many buyers are simply unable to shop in a used market where stocks are drying up, resulting in price inflation for used cars.
Evidence of the slowdown in the used market is seen in WesBank’s data. Demand for new vehicles, as measured through the volume of credit applications received, grew 3,6% in November. Conversely, demand for used cars slowed 2,6%, year-on-year. The used-to-new ratio for November 2017 was 2,16:1 – the lowest this year.
“The current consumer activity in the new vehicle market is indicative of the appetite for a good deal. Consumers are willing to buy new when they can see value,” said Mahoney.
“However, buyers should also be responsible and plan ahead when considering a car purchase. In addition to ensuring their budgets can comfortably afford their monthly instalments for the next five to six years, they should also leave enough room to absorb rising ownership costs such as fuel, insurance and maintenance.”
