Cautious optimism in the automotive sector

New-vehicle sales may have recorded their eighth successive year-on-year improvement in May but some analysts remain divided on the sustainability of the recovery.

Figures released on Monday by motor industry association Naamsa showed that 45,308 new cars and commercial vehicles were sold in SA last month. That was 22% more than the 37,139 in May 2023.

It was the eighth month in a row, dating back to October 2024, that sales have outperformed those of a year earlier. After five months of 2025, the aggregate market is 12.6% ahead of the same stage of 2024 — up from 205,771 to 231,719.

Brandon Cohen, chair of the National Automobile Dealers’ Association (Nada), thinks the real market is actually stronger than it appears.

He said that of the 24 Chinese brands currently selling vehicles in SA, 12 currently don’t report their sales numbers.

The new-car market was particularly buoyant in May. Compared to the corresponding month last year, they rose by 30%, from 24,419 to 31,741.

After five months, they are leading 2024 by 21.2%, up from 134,943 to 163,598. Sales of bakkies and minibus taxis improved last month but still lag 2024 year-to-date.

Sales of medium and heavy trucks are ahead but extra-heavies continue to lose ground.

However, WesBank marketing head Lebo Gaoaketse warned against getting too excited about last month’s sales.

May 2024 was a national election month, when political and economic uncertainty was at a peak. Sales that month were 14.2% weaker than those of a year earlier.

Last month’s year-on-year improvement, therefore, was off a particularly low base. Gaoaketse said the market was “a solid volume performance rather than an overriding reason to celebrate”.

He added that “while volumes continue to be confidence-inspiring, South African household budgets remain under pressure. The market’s expected slow recovery is continuing to play catch-up but the industry should remain vigilant and will continue to have to drive innovative reasons to continue attracting consumer and business decisions to purchase new vehicles.”

Naamsa CEO Mikel Mabasa was more bullish. He said the Reserve Bank’s latest rate cut, combined with a stronger rand and lower inflation, would benefit not only cash-strapped consumers, but could also encourage motor industry investments.

“A structural decline in inflation expectations could, over time, underpin structurally lower interest rates. This would be transformative for automotive consumers, who remain highly sensitive to monthly instalment costs. At the same time, manufacturers would benefit from reduced inflation-driven input costs, enhancing cost-competitiveness and export-pricing power,” he said.

While market newcomers, particularly Suzuki, Mahindra and some Chinese brands, continue to eat away at the sales of long-established names, Nada vice-chair Thembinkosi Pantsi said it was a different story in the used-car market. 

Many customers, he said, were choosing pre-owned models from aspirational brands rather than new vehicles from cheaper names.

“This trend has been gaining traction in recent months, with some buyers even expressing interest in premium-brand cars between seven and 10-years-old,” he said.

Vehicle exports disappointed in May — down 14.6% from 35,277 to 30,112 — but this had little to do with the US decision in April to impose 25% tariffs on imported cars from around the world.

The primary cause was the month-long production suspension at Volkswagen Group Africa’s Kariega assembly plant in the Eastern Cape to install manufacturing infrastructure for a new car model due next year.

furlongerd@businesslive.co.za