By: Theo Klein
New vehicle sales dropped by 22.4% m/m in July 2022 to 677 units compared to 872 units sold in the prior month according to the National Association of Automobile Manufacturers of South Africa (NAAMSA). On an annual basis, vehicle sales declined by 15.3% y/y in July 2022, dipping below its 6- month moving average.
Passenger and light commercial vehicles had the largest share of units sold in July 2022 with a 56.4% and 39.3% share of all units sold respectively.
On a monthly basis, extra-heavy and heavy commercial vehicles recorded the largest declines in sales.
Vehicle sales during 2022 were trending above 2021’s levels until June 2022. July’s datapoint is the third monthly and annual decline in vehicle sales, and it is the first time that the number of units sold came in below levels seen in 2021.
We still see upward momentum to spare parts and accessories inflation rates, while prices charged for vehicle services and repairs remain muted.
Motor car inflation rates have slowed to lower single digits during 2022, averaging 4.2% YTD compared to 8.8% in 2021.
In previous reports, we mentioned that car prices are likely to rise by between 3% – 5% per quarter following our discussions with various brands in Windhoek.
As usual, Toyota and Volkswagen remain dominant brands in the local automotive market.
The 7 brands in Figure 5 accounted for 71% of total vehicle sales during July 2022.
Global perspectives European carmakers registered the lowest number of new vehicle sales during June 2022 since 1996 according to data released by the European Automobile Manufacturers’ Association.
Vehicle sales decreased by 17% y/y in June 2022, with Volkswagen incurring the largest decline of 24% y/y.
While manufacturers such as BMW AG, Volkswagen and Mercedes AG indicated in May 2022 that semiconductor shortages eased, it will take time for this to increase production and supply global dealers with stock.
Geopolitics could also be driving higher car prices as certain brands relocate their value chains. Following the war outbreak in Ukraine, Renault sold its 68% stake in AvtoVaz (a state backed entity in Russia) for one Russian Ruble and Jeep announced in July 2022 to close its plant in China according to Bloomberg Intelligence.
Indeed, a potential war between Taiwan and China could see global supplies of semiconductors tumble.
Globally, car manufacturers are still facing high raw material and energy costs, which contribute to vehicle price increases.
Car prices have also increased across the world as carmakers focus their limited production on their most expensive and profitable models.
In addition, energy shortages and potential energy rationing in Germany are driving concerns of plant shutdowns, worsening stock shortages globally. All the above factors – together with a weak Rand exchange rate – risk seeing vehicle prices continue to rise in Namibia, making it more expensive to purchase and operate cars for Namibians.
Coupled with the rise in interest rates, we expect demand for new vehicles to start showing signs of a retreat in the vehicle sales data coming out in coming months.