New vehicle sales take positive turn in August, but year-to-date sales worryingly low


• 33 515 new vehicles were sold in August 2020.

• Wesbank credits a low interest rate for sales uptake.

• Year-to-date sales are down 120 960 compared to 2019.

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The new vehicle market displayed the government's economic objectives as the country moved into lockdown level two regulations during August.

As various initiatives begin contributing to a gentle easing of economic activity and stimulus to multiple sectors of the South African economy, the new vehicle market could have started gaining some momentum as activity and sales increased.

Overall volumes of new vehicle sales increased by 1119 units from July 2020 to 33 515. This is 26.3% down on August last year, considering the July market had declined 29.6% year-on-year.

Toyota Hilux

2020 Toyota Hilux (Calvin Fisher)

Good stimulus

While this is by no means an immediate sign of recovery for the market, it is certainly a good sign of some stimulus.

The volume shift in the market came from rejuvenation in the government's spend rather than consumer or business demand. Growth of 63% and 82.5% in the passenger and light commercial vehicle (LCV) segments in this channel accounted for 1257 additional units compared to August 2019. The government channel accounted for 1419 units in total, providing most of the impetus for the market's volume growth in the month.

Dealer channel sales - which represent consumer and business sales activity and consequent levels of confidence - did show small signs of recovery. Passenger car sales through dealers declined 15.9% year-on-year compared to the 18.7% decline in July, while LCVs were 21.1% lower than August last year versus 17.1% lower in July.

Overall, the passenger car segment recorded 19 545 sales, down 32.6% year-on-year. LCVs sold 11 336 units in August, 19.3% less than August last year. These remained mostly in line with the July performance across both segments.

polo vivo

2020 Volkswagen Polo Vivo (Quickpic)

Low-interest-rate environment

WesBank continued to experience an uptake on fixed-rate deals thanks to the low-interest-rate environment.

With interest rates at their lowest levels ever, fixing the rate on new finance agreements is a good way to save money over the duration of the contract. While consumers shouldn't expect to necessarily conclude a finance deal at the current prime rate on a fixed-rate agreement, it remains an excellent opportunity to look at acquiring a new vehicle.

The new vehicle market continues to experience aggressive marketing offers from most vehicle brands, with several special deals available. Consumers should remain careful of their levels of debt, however attractive these deals seem. We at Wesbank urge consumers to fully understand the terms of the finance offer, not only the amount reserved in balloon payments, and to allow for necessary expenses, including insurance and maintenance, within their affordability.

Year-to-date sales remain 34.6% down in the same period last year, indicating the very harsh reality of the pandemic's effect. The new vehicle market has sold 120 960 fewer cars so far this year than it did last year. While there is reason for some optimism returning, both industry and individuals must continue to be vigilant.

Lebogang Gaoaketse is the head of marketing and communication at WesBank.

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