DAVID FURLONGER: A dose of reality

Welcome back to the real world. After annual growth of 22% and 13.9% in 2021 and 2022 from the depths of the Covid crash, new vehicle sales are positively snail-like in 2023. Figures released last week by Naamsa show that after two months of the year, sales of cars and commercial vehicles, at 89,434, were 4.3% ahead of the 85,727 at the same stage of 2022.

Not to worry, says WesBank marketing head Lebogang Gaoaketse. We must get used to “smaller increments” of growth now that the market has returned to something like normality. “This shouldn’t necessarily be construed as poorer performance from the market, but rather more realistic growth that can be expected as the market continues its recovery.”

He adds: “It remains positive for the market to have recovered volumes to this level, especially given the external constraints over the past few years.” Consumer demand, as measured by credit applications, “provides a solid foundation off which the market can continue its recovery”.

As I’ve written before, the “normality” Gaoaketse refers to is a sad reflection of where the market used to be. Still, given the miserable state of the economy, and low levels of business and consumer confidence, the motor industry can be grateful for any improvement.

How much is it likely to be? In January, Toyota South Africa president Andrew Kirby forecast full-year market growth of 7.8%. That would raise the market to 576,000 from last year’s 528,963. Naamsa CEO Mikel Mabasa thinks 6.3%, or 563,000.

Cyril Zhungu, Standard Bank’s head of automotive retail finance, comes in even lower, at 5%, or about 550,000. All three would take the market safely back above 2019’s pre-Covid 536,612 — but still a long way from historic highs.

​Zhungu says inflationary pressures are likely to increase new vehicle prices and lower demand, particularly for high-priced cars. He expects most growth in the R350,000-R500,000 range.

He says: “Affordability for private consumers will remain the key consideration for any vehicle purchase decisions, with more customers expected to either hold on to their vehicles for longer or shift further to lower-priced models and opt for pre-owned units. The consumer vehicle purchase decisions will be driven by more practical considerations than aspiration.”

Mark Dommisse, chair of the National Automobile Dealers’ Association, is steering well clear of the forecast game. Beyond asserting that there is still growth potential, he says it is “quite difficult to predict how the new vehicle market will play out”.

One can understand his reticence. On top of further rises in interest rates and fuel prices, figures released this week have reinforced the fact that load-shedding is hammering economic growth prospects.

Mabasa, however, stresses that the problems aren’t all home-grown. He says: “The Reserve Bank’s decision to increase interest rates for the eighth time in a row is a reminder that South Africa, like much of the world, is still in the midst of an increased cost of living predicament caused by global geopolitical events such as the Russia-Ukraine conflict, lingering effects of the pandemic, and a global inflationary environment.”

Still, the situation makes me think of a meme sent to me this week, showing Russian President Vladimir Putin engrossed in a book supposedly written by President Cyril Ramaphosa, titled How to Destroy a Country Without Bombs.

Last year, car sales drove the overall market revival with 19.3% growth. This year, they are lagging: 3% against the overall 4.3%. In February, the year-on-year increase was 1.1%, with rental companies snapping up 12.2% — almost one in eight — of all cars sold.

However, there’s good news for proponents of electric vehicles (EVs). January’s EV summary, also released last week, showed a 226.9% sales increase from January 2022, to 693. Mercedes-Benz South Africa and Toyota South Africa, which make hybrid EVs, increased production by 211.6% from a year earlier.

By end-February, sales of light commercial vehicles were up 7.7%, medium trucks up 15.8%, heavy trucks down 10% and extra-heavies up 7.6%. Buses, which live in a low-volume world of their own, improved sales by 53% — from 49 to 75.

Mabasa expects vehicle exports, which account for nearly two-thirds of South Africa motor industry production, to increase by 8.3% in full-year 2023. After two months, they are down 8%, from 55,255 to 50,837. The turnaround can’t come soon enough, to maintain the production momentum the industry enjoyed at the end of 2022. Naamsa’s latest quarterly report, covering the last three months of 2022, shows that domestic vehicle production increased by 25.7% compared with the corresponding quarter 2021, which had been hit by a three-week steel and engineering strike.

Car production led the way, growing 49.2% from 52,754 to 78,708.