Car buyers dive in to dodge tax hikes

Cape Town - The impact of public holidays on domestic new vehicle sales in March - including the Easter weekend - has been partially offset by pre-emptive buying by consumers during the month to avoid tax increases, the National Association of Automotive Manufacturers of SA (Naamsa) said on Tuesday.

These tax increases include value added tax (VAT) which increased from 14% to 15% on 1 April, new vehicle emissions taxes and ad valorem duty changes announced in Budget 2018.

Commenting on new vehicle sales statistics for March released by the Department of Trade and Industry, Naamsa said domestic new vehicle sales had recorded their highest monthly total so far in 2018. Aggregate domestic sales were at 49 233 units, improving by 535 units (1.1%) compared to March last year.

In contrast, export sales for March 2018 were at 27 438 vehicles - a decline of 2 421 units (8.1%) compared to vehicles exported in March last year. Naamsa said the March 2018 export number had been affected by the BMW switch-over in production from the 3-Series to the X3.

Overall, out of the total reported industry sales of 49 233 vehicles, an estimated 44 417 units (90.2%) were dealer sales; an estimated 5.3% were sales to the vehicle rental industry; 2.7% to industry corporate fleets and 1.8% to government.

Commercial vehicles

Naamsa said the March 2018 new car market had held up relatively well compared to the commercial vehicle segments and at 32 176 units had registered an improvement of 1 144 cars (3.7%) compared to March last year.

The association pointed out, however, that due to seasonal factors, the car rental industry contribution had declined, but still accounted for about 7% of new car sales in March 2018.

Domestic sales of new light commercial vehicles, bakkies and mini buses had been marginally weaker and at 14 701 units during March 2018 had registered a fall of 345 vehicles (2.3%) compared to March last year.

Sales in the low volume medium and heavy truck segments of the industry had once again remained under pressure, according to Naamsa, and at 722 units and 1 634 units respectively, had recorded a fall of 123 vehicles (14.6%) in the case of medium commercial vehicles, and 141 vehicles (7.9%) in the case of heavy trucks and buses compared to the corresponding month last year.

Subdued investment sentiment

Continuing lower commercial vehicle sales figures reflected subdued investment sentiment in the economy, according to Naamsa.

"Medium term prospects for the South African economy had improved considerably on the back of the decision by Moody’s to retain SA’s international and domestic credit rating at investment grade with a stable outlook as well as the 0.25% reduction in the repo rate by the SA Reserve Bank at the end of March," Naamsa said in its statement.

"In addition, the continuing strength in the exchange rate should impact positively on new vehicle price inflation going forward. As a result of these developments – together with improved business and consumer confidence – economic growth for 2018 could recover to around 2% and this in turn would benefit domestic new vehicle sales over the balance of the year."

At this stage Naamsa anticipated that, on an annualised basis, new vehicle sales could improve by around 3%, in volume terms, compared to 2017.

"The outlook for the global economy was one of fairly strong growth, which should benefit new vehicle exports going forward," said Naamsa.

"Factoring the impact of model run out and model run in on the part of one major exporter, a modest increase in annual vehicle export sales volumes was still possible in 2018."

Nedbank's Economic Unit is also of the opinion that the vehicle market is likely to improve during 2018 due to better economic and political conditions, which will uplift business and consumer confidence. However, the unit pointed out that the growth rate will be contained by slow growth in disposable income and higher taxes.

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