Buyers' advice, Motoring News, Vehicle sales

Vehicle sales look brighter – but beware rising prices for ‘used’

JOHANNESBURG, South Africa – The new vehicle market returned to its first full month of sales in June 2020 since the Covid lockdown started but the market remains under ”immense pressure”.

The National Association of Automobile Manufacturers of SA (Naamsa) told The Corner new vehicle sales were down by 38% down on June 2019 by 14 086 units to 31 867 despite apparent high demand on WesBank’s application data.

WesBank reported: “Key changes to market behaviour that could be the beginning of new trends as car buyers adapt to short-term budget pressures as a result of Covid which could become longer-term changes as the effect of Covid ripples through the value chain and vehicle purchase decisions face new fundamentals.”

‘STRONGER APPETITE?’

Most notable, according to WesBank, was the uptake of fixed-rate deals, an opportunity provided by current particularly low interest rates – though these will inevitably need to increase short- to medium-term.

Buyers, private and business, have taken advantage of the rates through June. WesBank reported average deal size had increased substantially. “Increases in deal size of 10-15% across new and used vehicles – compared to June 2019 – shows either a stronger appetite for quality stock based on inflation or an increase in the portion of debt in every deal.”

Car sales declined by about 33.5% to 19 264;  to understand the effect of that June 2019 passenger car volumes ran to 28 931 so nearly 10 000 deals were lost. Light commercials were down close to 30% at 10 190 units.

GREATER DEMAND FOR USED

WesBank data comment again: “Market activity is expected to remain low for the rest of 2020 as the uncertainties of Covid continue to pressure buyers and businesses. Household budgets were already under pressure before lockdown – now, in an economy expected to shrink by more then seven percent, many potential buyers will delay buying.”

The used car market, however, was expected to continue to show greater demand through prices – though some pundits forecast their prices to rise, too.

Final words from WesBank: ”June sales begin to provide a picture of what to expect for the rest of 2020 with many challenges for buyers and sellers and positive elements that will test the industry’s resilience.”

…AND FURTHER COMMENT, FROM NADA…

THE National Automobile Dealers’ Association in South Africa adds that it is encouraged to see a slight improvement in new vehicle sales through June 2020 – but warns that ”there’s a long way to go before the market sees any recovery”.

Mark Dommisse, NADA’s chairman, commented: “Following the disastrous March, April and May we saw positive activity on dealers’ floors in June. Of the total reported industry sales of 31 867 vehicles across all segments an estimated 29 100 units or 91.3% represented dealer sales.”

The global automotive industry, NADA says, has been hit hard by the spreading of the coronavirus. In South Africa the industry was brought to an abrupt halt in March because of the ANC government’s declaration of a ‘State of Disaster’ and a business and public national lockdown.

Auto dealers were mandated to close to any sales activity – a situation that lasted for two-and-a-half months.

Dommisse added: The trend at the moment (July 1 2020) is that buyers of new vehicles are leaning towards the mid- to low end-priced vehicles. However, on the back of new vehicle price increases from the weakening rand, there are decent buying opportunities in new cars across all ranges.

”The fuel price, recently increased but still cheaper than before lockdown, coupled with the lowest interest rates we’ve seen in years, will also create buying opportunities.

”We’re hoping that this positive trend will continue through July and for the balance of the third quarter of 2020.”

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