The decline in South African new vehicle sales accelerated further in June, with sales reported through the National Association of Automobile Manufactures of SA (Naamsa) down 21.9 percent compared with the same period last year.

Domestic new vehicles sales - at 39 064 units - registered a large decline of 10 956 units compared with the 50 020 vehicles sold during the corresponding month last year.

In May new vehicle sales fell 23.4 percent, or 12 095 units year on year.

Naamsa said the domestic new vehicle sales environment continued to reflect extreme weakness.

Overall, of the total Naamsa reported industry sales of 39 064 vehicles, 85.1 percent represented dealer/retail sales, 6.2 percent sales into Naamsa member company fleets, 4.8 percent sales to government and 3.9 percent representing sales to the car rental industry.

Tight monetary conditions

"The slump in the new car market worsened further during June 2008 as the current tight monetary conditions continued to weigh on consumer spending," Naamsa said.

Naamsa reported new car sales at 22 861 units reflected a decline of 7964 units or 25.8 percent compared with the 30 825 new cars sold during June 2007. Factoring in the new car sales not reported in detail, the year on year decline had amounted to 8464 units or a fall of 24.8 percent. The daily sales rate during June 2008 represented the lowest level in over four years.

Sales of Naamsa reported new light commercial vehicles, bakkies and minibuses at 12 975 units reflected a decline of 2888 units or 18.2 percent compared with the corresponding month last year. Taking account of the light commercial vehicles sales reported by the AMH Group, the year on year decline amounted to 3021 units or 18.2 percent, Naamsa added.

Sales of vehicles in the medium and heavy truck segments of the industry reflected a mixed picture and at 1079 units and 2149 units respectively, recorded a substantial decline of 296 units or 21.5 percent, in the case of medium commercials, versus a gain of 192 units or 9.8 percent, in the case of heavy trucks and buses – compared with the corresponding month last year.

Vehicle export performed well

On the new vehicle export side, the industry had continued to perform well and export sales were supporting the operations of vehicle and component producers, Naamsa said.

In contrast, the worsening downturn in the domestic new car and light commercial vehicle markets was having a major negative effect on automotive dealers and the operations of importers and distributors in South Africa, it said.

During May the industry exported 23 191 new vehicles - an improvement of 10 182 vehicles or 78.3 percent from a year ago. For the first half of 2008, export sales reflected an impressive year on year improvement of 52.7 percent, Naamsa added.

Looking ahead, Naamsa said for the balance of 2008 in the domestic market, new vehicle sales will remain under severe pressure as a result of the cumulative effect of interest rate rises, inflationary pressures, high levels of personal debt and a slowdown in economic activity.

"Current monetary policy was now having a significant effect on curbing consumer demand in South Africa, particularly in the case of the automotive sector. Whilst it is difficult to forecast the extent and duration of the ongoing contraction in the South African automotive sector, the South African economy – principally as a result of current and projected major investment projects - was probably in a relatively good position to weather the current global commodity price storm and financial market volatility," it said.

Any improvement in economic activity levels in the medium term would benefit the auto industry. The relatively competitive exchange rate and existing vehicle export contracts should also continue to lend support to vehicle and component export activities over the medium term, it concluded.

I-Net Bridge