By:Fransina Nghidengwa
There has been a downward trend in vehicle sales after the industry reached its peak of 1,226 units in March 2023, with only 982 units were sold in May 2023.
This represents the lowest number of vehicles sold since February 2023, despite a 2.2% month on month (m/m) decline and a modest YTD increase of 3.2%.
According to the Simonis Storm, on an annual basis, vehicle sales rose by 27.7% year on year (y/y)in May 2023, compared to 11.6% y/y in April 2023.
“Local dealerships have reported a mixed pattern of demand during 2023 thus far. High-end models have displayed positive demand, contrasting with flat to negative demand for low-end models,” Simonis Storm said.
This divergence, the firm stated, suggests the presence of inflationary pressures affecting the middle class, which is typically associated with the consumption of low-end vehicle models.
Furthermore, the upward movement in interest rates has presented consumers with difficulties in obtaining loans at affordable terms. Specifically, car loans typically involve a rate of prime plus 2 percentage points, which implies that current car loan rates stand at 13.5% on average.
Moreover, a significant number of car loan applications are being rejected by banks, primarily due to clients facing challenges in meeting the stringent requirements imposed by financial institutions or carrying existing excessive debt burdens that cannot be further indebted without raising default risks.
“This aspect serves as an additional contributing factor to the decline in new car sales, as reported by various local car dealerships we engaged with,” Simonis Storm said.
Moreover, between May and April 2023, vehicle prices increased by 6.7% y/y. The cost of shipping goods, including vehicles, remains relatively high, and these costs are ultimately passed on to consumers.
The Baltic Dry Index (BDI), which measures shipping rates, is currently at 18.1% of its peak during the pandemic at the beginning of June 2023. This suggests that shipping rates have mostly returned to normal levels, potentially exerting deflationary pressures on vehicle imports. Therefore, although shipping costs are decreasing in US dollars, the weak Rand still implies upward pressure on shipping costs for local car dealerships.
Meanwhile, the market share across brands is relatively flat and unchanged since 2015. Toyota has dominated the market since 2015, with an increase in share in the market from 37% in 2022 to 45% in May 2023. More specifically, Toyota dominates the passenger and medium-commercial vehicles market in May 2023.
“Mercedes sold the most medium commercial vehicles (12 vehicles) and Volvo dominated the extra heavy vehicles market during May 2023. Volkswagen showed a significant decline in sales in the market this month, they reported that their sales level was the lowest in years,” the firm said
According to analysis, there is a shortage of various car parts, namely, 2-way conductors, cable harnesses, and automatic gearbox components – of which Ukraine was a major manufacturer and exporter – causing production delays.
Simonis Storm said this poses a threat to vehicle supply to Namibia in the future and to vehicle prices.
Vehicle Sales Take A Nose Dive
