2021 off to a hopeful start as new vehicle sales show slight resurgence in January

• 34 784 new vehicles were registered in January 2021.

• Sales last month were 13.9% down compared to January 2020.

• New vehicle sales are improving slightly after Covid-19.

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The pandemic's burden, the continued economic pressure, and the resultant low levels of business and consumer confidence expectedly took their toll on new vehicle sales during January. But there was reason for light amidst the gloom, as the market continued to show signs of a slow recovery towards the hope of a better 2021.

According to the National Association of Automobile Manufacturers of South Africa (Naamsa), new vehicles sales were 13.9% down on January 2020 to register 34 784 units.

In January, sales were in line with expectations considering the country started the sales year in a return to Level 3 lockdown. At Wesbank, we expect new car sales to remain under pressure this year as a result of subdued demand from both retail and corporate sectors, as well as Government. However, the used car market will remain buoyant as consumers continue to seek to lower their vehicle-related expenses.

Ford Ranger
2021 Ford Ranger XL Sport Pack

Reassuring performance

It remains sobering that 2020 recorded the worst industry performance in 18 years. Considering that 2020 sales were 29.1% down on 2019, the new vehicle market's performance in the last quarter and in January this year remains reassuring.

It is also interesting to contextualise the broader economic environment over the last five years, the impact of which has merely been accelerated by the pandemic. The 2020 market is 38.4% lower than the 2015 volume of over 600 000 vehicles, indicating the sheer pressure of the past five years of recession. Then consider that the purely organic fall-off in sales during 2016 was 11.4% lower than 2015 - almost half the decline in sales last year due to the pandemic - and perhaps the motor industry is fairing quite well considering the circumstances.

Passenger car sales took the brunt of the volume losses compared to last year, down 18% to 23,853 units. Not even Light Commercial Vehicles (LCV) could muster a growth number that the sector had shown towards the end of last year. LCV sales were 4.9% down to 9301 units.

READ: 'Make new vehicles more affordable and boost sales by 28 000 units' per annum - NADA

While the current signs of improvement in Covid-19 infection rates look promising, the uncertainties of the pandemic will continue to impact the new vehicle market and the South African motor industry. The new car market has seen steady volumes in the entry-level and cost-conscious segments at the expense of the premium end of the market. We see no economic evidence to suggest that this will change significantly this year.

While interest rates remained unchanged during January, they continue to be at historic lows. It will stay low for some time in an attempt to stimulate market growth, but there will be little to no room for further cuts. This continues to provide a good opportunity for those consumers considering a new vehicle.

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

Lebogang Gaoaketse
Lebogang Gaoaketse
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