Tough month for truck sales

By Colin Windell

February was a tough month for the automotive market and sales across the board were down as were exports, reflecting the rather subdued investment sentiment in the economy.

Domestic sales of new light commercial vehicles, bakkies and mini buses reflected continued weakness and at 13 212 units during February, registered a fall of 1 410 vehicles or a decline of 9,6% compared to the 14 622 light commercial vehicles sold during the corresponding month last year. 

Sales in the low volume medium and heavy truck segments of the Industry also remained under pressure and at 574 units and 1 361 units, respectively, recorded a fall of 89 vehicles or a decline of 13,4% in the case of medium commercial vehicles and a decline of 232 vehicles or a sharp fall of 14,6% for the heavies.

Aggregate domestic sales at 46 347 units declined by 1 854 vehicles or 3,8% from the 48 201 vehicles sold in February last year, while export sales registered a fall of 1 681 units or a decline of 5,8% compared to February last year.  However, exports for the first two months of the year remained 2% above the corresponding two months in 2017. 

Recent improvement in the Reserve Bank’s leading indicator and further recent increases in the Purchasing Manager’s Index, anticipated an improved outlook for the economy over the medium term. 

The considerable appreciation in the value of the Rand should also reduce inflationary pressures. Recent positive political developments and improved business confidence should also serve to support higher economic growth in 2018 and provided South Africa was able to avoid a further credit ratings downgrade at the end of the first quarter of 2018, actual economic growth could well surpass current expectations.

In such an environment, economic growth could well recover to a level above 1,5% in 2018. Replacement demand and reduced vehicle price inflation, as a result of the stronger Rand, should support new vehicle sales in the months ahead.

However, the increase in Value Added Tax, vehicle emissions taxes, the substantially higher ad valorem duty for premium luxury vehicles with retail selling prices in excess of R900 000 as well as the substantial increase in the fuel levy will impact on consumers’ disposable income and could impact new vehicle sales from April, 2018 onwards.