Consumers Put The Brakes On New Car Spending

Car exports set a new record in 2016, but it was a rocky road for new car sales domestically and competition for sales is now fierce.

- Glenda Williams

South Africa has an entrenched driving culture history. An innate love of cars combined with mobility necessity and the uplift in status that car ownership provides has historically put new car sales pretty much in the fast lane.

But the new car market has hit a rocky road in recent years, with the motor industry being challenged on multiple fronts. These include currency weakness, high interest rates, petrol price hikes, changing mobility habits and a rise in used car sales. Even those who own cars are hanging on to them longer. The economic downturn together with affordability constraints has meant an uphill struggle for new car sales domestically, the downward trend continuing throughout 2016. Competition for sales on local soil is now fierce, with cash incentives and innovative financing options now featuring more prominently.

Sluggish domestic market

New car sales in SA have been on the decline since 2014 and 2016 was no different. Despite a strong 16.3% contribution by the car rental sector, it was an annus horribilis for the new car market, which recorded an 11.4% drop in sales compared to 2015, reports the National Association of Automobile Manufacturers of South Africa (Naamsa).

The drop is most significant in the consumer driven passenger car sector, unsurprising perhaps given biting economic conditions and affordability thresholds. Despite attractive cash incentives, the segment continued to feel the pinch in December, declining 14% month-on-month, and posting an overall drop of 12.4% for 2016.

Despite an increase of around 14% in new car prices during the year, preliminary estimates suggest sales turnover in 2016 declined around 2% to R233bn for domestic sales of new vehicles, reports Naamsa.

Affordability driving consumers to the used car market