The motor industry fears that any further tightening in monetary policy could result in production cuts, business closures and job losses.

The National Association of Automobile Manufacturers of SA (Naamsa) yesterday cautioned the monetary authorities to be aware of the current sociopolitical- and economic challenges facing South Africa, and the resulting implications in terms of consumer and business confidence.

Higher interest rates are affecting dealers, importers and distributors as well. Total vehicle sales last month reported to Naamsa fell to 39533 "a decline of 23.4 percent on the same month last year, while new car sales were 22647" or a decline of 28.1 percent.

Sales for the first five months of the year are now down 19 percent on the same period last year. Taking into account sales by importer Associated Motor Holdings (AMH), sales were down to 43214, or 28.7 percent lower.

Light commercials faired little better with sales at 13992 showing a decline of 17.2 percent, and with AMH included sales were down by 19 percent.

For the first time in many months, sales of medium commercials fell by 33.7 percent to 912, but heavy trucks continued to improve with a gain of 7 percent to 1982.

Factors impacting on the extremely poor showing last month were interest rate hikes, inflationary pressures, high levels of debt and the general slowdown in the economy. Car sales were at their lowest level since December 2004.

The last time May sales were lower was in May 2004, said Brand Pretorius, chairperson of McCarthy Motor Holdings. Reduced sales volumes, shrinking margins and high funding costs had already resulted in the closure of a number of dealership and used-car outlets, he said.

With an almost guaranteed interest rate rise next week, the current sales pace was expected to continue for the rest of the year, said Jacques Brent, who is vice-president of sales and marketing at Ford.

A factor influencing May sales was the loss of selling days because of extended public holidays.

Consumer confidence had also been hit by the xenophobic violence in the country, said Mike Glendinning, sales and marketing director at Volkswagen.

The Times