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Light at the end of the tunnel for South Africa’s car industry

South Africa’s new-vehicle industry experienced its eighth consecutive month of declining sales in March, but there is light at the end of the tunnel.

Last month, local registrations for passenger cars; bakkies and minibuses; and medium and heavy commercial vehicles dropped by anywhere from 2.1% to 15.9% in comparison to March 2023, while exports didn’t fare too well either, shrinking by 27.1% year on year.

Naamsa, the automotive business council, attributes the depressed performance to the South African Reserve Bank’s (SARB) aggressive hiking of interest rates in an attempt to contain inflation that took time to filter through to new-vehicle sales, coupled with escalating fuel costs and the Easter Holiday period in which car showrooms are traditionally less active than usual.

Uphill from here

While the trend of declining car sales is expected to continue for the first half of 2024, the second half is looking much more upbeat.

“South Africa’s economic growth outlook for 2024 remains muted, but at a projected 1.2% by the SARB it would still be stronger than 2023,” said Naamsa.

“Only once the interest-cutting cycle commences, likely during the second half of the year, along with the easing of inflation, better economic prospects are expected for the new-vehicle market.”

This is reflected by the Absa Purchasing Managers’ Index which is currently at its most positive level since January 2023 and showing a further improvement in business sentiment in six month’s time.

In addition, prospects for vehicle exports remain optimistic going forward on the back of new model introductions by major exporters paired with a global economic cycle that is expected to bottom out in the first half of 2024, said Naamsa.

This year, VW’s Uitenhage factory will become the sole producer of the evergreen Polo worldwide which will likely boost monthly shipments of the hatchback by a noticeable margin.

Similarly, Toyota recently included the mild-hybrid Hilux and Fortuner to its roster of locally-made vehicles, as did BMW and Ford with the plug-in-hybrid X3 and Ranger, respectively, all of which will start to be delivered to overseas markets in the coming months.

Nissan has also added several African nations such as Algeria, Egypt, Libya, Sudan, and Tunisia to its export portfolio and will introduce several new Navara variants to the sub-Saharan African region later in the year which will require it to ramp up production, and consequently shipments, of the bakkie at its Gauteng factory.

Alongside these new vehicles, lower inflation, central bank easing, and modest global economic growth are expected to support the South African automotive industry’s export performance for the remainder of 2024, said Naamsa.

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