Improvements in the tourism sector have helped the vehicle sales sector see its best performing second quarter of 2023 since the second quarter of 2017.
This is after the vehicle sector saw a downward trajectory in previous months. Last month was the first monthly increase in sales this year.
Previously, it was reported that on an annual basis occupancy rates within the tourism sector improved by 11.4 percentage points from 39.4% in May 2022 to May this year.
Purchases by rental companies saw vehicle sales increase by 51.4% year-on-year (y/y), from 872 units in June 2022 to 1,320 in June 2023.
Light commercial vehicles drove sales in June 2023, increasing by 74.7% y/y – from a low base of 375 units to 657 units.
Meanwhile, passenger vehicles accounted for 44% of sales and grew in sales by 34.3% y/y in June 2023.
Economists at Simonis Storm Securities (SSS) have observed that smaller segments of the market – medium to extra-heavy commercial vehicles and buses – collectively account for 6.3% of total sales in June 2023.
At least 40 extra-heavy (an 18.9% y/y increase), 27 medium (a 107.7% y/y increase), 11 heavy (an 8.3% y/y decrease) commercial vehicles and 1 bus (a 50.0% y/y decrease) were sold in June 2023.
Analysis has further shown that regarding growth the wholesale and retail sector has surpassed pre-pandemic levels but not in real value terms.
“However, the wholesale and retail sector grew by 5.7% y/y in 1Q2023. At the same time, total vehicle sales grew by 18.5% y/y during the same period. Most local dealerships are positive on sales going forward – seeing high demand in passenger and commercial vehicles – and this should be supportive of further growth in the retail sector,” said the economists.
While transport has only been 3% of the gross domestic product since the first quarter of 2019, which is relatively low compared to other sectors in the economy, the economists are of the view that it could be a driver of economic activity in 2023, supporting complementary activities such as retail, mining, tourism and agriculture.
They have however warned that globally, there are still risks that could impede decreases in vehicle prices.
“Supply constraints continue to be a challenge for the flow of new vehicle stock. According to McKinsey, the semiconductor industry experiences imbalances between supply and demand, with lead times for semiconductors ranging from 20 to 40 weeks. About 90% of the demand driven shortages are related to mature technology and trade wars between the US and China,” SSS stated.
“Short-term demand and supply dynamics are expected to remain volatile, with the industrial and automotive sectors likely to face supply issues in the short- and medium-term. The demand for semiconductors is projected to increase by 6-7% annually by 2030, making geopolitical developments between the US and China a critical factor,” the firm added.
Meanwhile, China has placed a trade restriction on two minerals (gallium and germanium) which are critical in the production of semiconductors, missile systems and solar cells.
This, the economists said, will worsen supply chain issues of advanced technologies, placing upward pressure on their prices and creating larger backlogs in products such as vehicles.