Picture: ISTOCK
Picture: ISTOCK

July’s unexpected rebound in new car sales is a sign of better things to come, banks said on Tuesday. Shrinking interest rates, a stronger rand, slowing prices and lower household debt were all emboldening consumers to dip their toes back into the market.

"As long as there are no more unpleasant economic or political revelations, I think this could be the start of a turnaround," Standard Bank executive Nicholas Nkosi said.

Figures published by the Department of Trade and Industry showed new car sales grew 6.2% in July compared to the same month in 2016, from 29,035 to 30,826. This was almost wholly responsible for a 4.1% improvement in the overall market, including trucks and buses, from 44,870 to 46,719. Sales of light commercial vehicles rose 1.7%, but heavier vehicles all showed declines.

A 25 basis-points drop in interest rates in July was too small and too late in the month to have a notable impact on the market, but WesBank’s Rudolf Mahoney said it sent consumers a positive message. This would be reinforced if a predicted similar downward movement follows in September.

Nkosi said his hope for improved sales confidence was based on the coming together of sound economic fundamentals. Besides interest rates, the stronger rand was helping manufacturers and importers restrain price increases. Then there was household debt. "Levels are still too high but they are coming down," said Mahoney. "Consumers are becoming better educated. They have felt the pain and are managing their finances better.

The National Association of Automobile Manufacturers of SA (Naamsa) described July’s figures as "encouraging" — helping make up for what had otherwise been a difficult year for vehicle sales. As a result, car sales for the first seven months narrowed the deficit on 2016 to 1% — 207,601 compared to 209,673. For the overall market, the gap was even narrower at 0.3%.

January to July 2017 aggregate sales totalled 316,386, down from 317,324 a year ago. Naamsa thinks full-year sales will match 2016’s 547,174.

Vehicle exports also surged ahead in July. At 35,486, they were a full 22.2% ahead of last year’s 29,030. Unlike 12 months ago, all plants were operating normally, with none in low-volume mode after the launch of new products. After seven months, aggregate exports, at 190,722, were 3.0% down on last year’s 196,727.

© Business Day

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