South African car makers are likely to overcome a slow start to 2018 and grow the number of vehicles sold in the year by 2.6% — up from 1.9% in 2017, BMI Research forecasts.

This would take the number of new car sold in SA to about 377,640 by the end of 2018.

"We maintain a positive outlook for the local market, despite the 3.3% decline in new car sales in the first quarter from the same period in 2017, which was mostly attributed to seasonality factors with the proliferation of public holidays during March, including the Easter recess, limiting selling days, and therefore we do not believe it is indicative of what to expect for the rest of the year," BMI said in a note e-mailed on Tuesday morning.

The researchers said the recent cut in interest rates, which took the prime rate banks quote customers to 10% from 10.25%, should offset the higher taxes car buyers need to pay in 2018.

This includes value-added tax (VAT) rising to 15% from 14%, along with higher vehicle emissions tax and ad valorem duty on imported cars.

BMI forecast SA’s real gross domestic product (GDP) growth to accelerate to 1.8% in 2018 from 1.3% in 2017.

"This brighter economic outlook will help boost consumer confidence and bode well for growth in vehicle sales," the research note said.