By:Staff writer
The repo rate has forced those purchasing vehicles to do so via cash transactions rather than on credit,a recent analysis has revealed.
In August this year, the Bank of Namibia’s Monetary Policy Committee (MPC) opted to keep the repo rate unchanged at 7.75%, with the prime rate staying at 11.5%. However, the MPC pushed up the repo rate by 50 basis points to 7.75% in June this year.
Simonis Storm Securities (SSS) has indicated that based on their calculations together with informed insight from local dealers, 59% of vehicle purchases in August 2023 were conducted through cash transactions, while the remaining 41% were financed.
SSS said the repo rate has acted as a deterrent, discouraging buyers from seeking vehicle loans due to the associated burden of higher interest rate payments.
The average monthly instalment for a vehicle costing N$150,000 is about N$3,600 for 48 months.
When adjusted for inflation, the stockbroker and wealth management company has observed that the growth of financed vehicles has remained relatively stagnant, averaging at -2.5% year-on-year y/y in FY2022 across all banking institutions.
It also expects one more 25bps hike before the end of the year by both the South African Reserve Bank and Bank of Namibia in response to the US Federal Reserve System’s hike in July 2023.
The company only expects repo rate cuts in the second half of 2024 and onwards.
SSS has also observed a surge in the sale of spare parts, indicating that Namibians would rather fix old cars than buy new ones.
“The spare parts industry has encountered an upswing in sales during August 2023, as evidenced by the modest uptick in annual prices. This signifies a preference among vehicle owners for the repair of their existing vehicles as opposed to acquiring new ones.”
While the demand for vehicles dipped by 13.2% month-on-month in August 2023, from 1,260 units in July to 1,094 units in August, on an annual basis, vehicle sales improved by a meagre 4.0% year-on-year in August, much lower than the consistent double digit growth figures witnessed in August 2022.
“Currently, the new vehicle market is experiencing a resurgence, driven by improvements in the supply chain landscape. Although certain high-end brand categories continue to encounter supply chain challenges, they represent a minority within the overall sample. Dealers have reported that new vehicle sales constitute a significant 80% of total sales, with the remainder comprising pre-owned vehicle sales,” SSS indicated.
Meanwhile, Toyota sold the most cars again in August, taking up 51% of the market space, 1 percentage point higher than the previous month.
Ford followed (7%), Volkswagen (6%), Kia (5%) and Scania (4%). The increased market share of Ford is primarily due to the high demand for the Ford Raptor as 64 were sold in August 2023.
“In the past, Volkswagen used to follow second but previous engagements exposed that their sales have been relatively flat due to higher prices,” SSS pointed out.
