
New vehicle sales dropped by 3% in 2024 versus 2023 while exports saw a staggering decline of 22.8% amid a tough economic environment.
At the onset of last year, the new vehicle market was still only 0.9% below the pre-pandemic level of 536,612 units in 2019.
With several green shoots in the industry at the time, it was thus anticipated we would see a year of two halves comprising a taxing first six half and an upswing in registrations during the second half, which unfortunately did not materialise.
“New vehicle sales remained under pressure in 2024, continuing to reflect a shift in the matrix with various new entrants in the domestic market, in particular Chinese brands, offering options at the more affordable end of the pricing spectrum as consumers battled a tough economic climate,” said Naamsa the Automotive Business Council.
Indeed, Chinese brands such as Chery and GWM carved themselves a healthy slice of the market in 2024 owing to their competitive pricing and attractive specifications.
“Despite a stronger year-end performance supported by strong seasonal sales to the vehicle rental industry, easing inflation, and two interest rate cuts, new vehicle sales decreased by 3.0% to 515,712 units compared to the 531,775 units sold in 2023,” said Naamsa.
The following table summarises annual aggregate industry sales by sector from 2020 to 2024:
When it came to exports, the picture was even less pretty.
For the first time since 2020, which was highly affected by the Covid-19 pandemic, vehicle exports declined in 2024 to 308,380 units.
The figure is a significant 22.8% lower in relation to the record performance of 2023 when overseas vehicle shipments hit 399,594 units.
Naamsa attributes the plummeting exports to a slowdown in demand in the European Union which is the domestic automotive industry’s key export destination, due to low economic growth in the region, stricter emission rules, and competition from cheaper electric vehicles from China.
The timing effect of new model introductions in South Africa by major exporting Original Equipment Manufacturers (OEMs) played a role, too.
“A significant two out of every three vehicles manufactured in South Africa are exported, enabling the domestic OEMs to reach a much broader consumer base beyond the South African market,” said Naamsa.
“Exports remain key to generate sufficient economies of scale and to achieve improved international competitiveness. As an export-oriented industry, the domestic automotive sector has embraced the trade opportunities via the specific trade arrangements that South Africa has concluded over the past three decades, opening certain markets in Europe, the US, and Africa, among others.”
The following table reflects the industry’s export sales performance from 2020 to 2024:
Cautiously optimistic
Despite 2024 not playing out as was hoped, there remains hope that 2025 will be a year of growth.
“The confluence of positive economic indicators and the resilience of the volume passenger car segment during the last quarter of 2024 suggests a potential rebound for the new vehicle market in 2025,” Naamsa said.
The South African Reserve Bank’s two interest rate cuts towards year-end, the first in four years, coupled with easing inflation, have created a more favourable economic environment.
The lowest fuel prices in nearly three years additionally bolstered consumer confidence and disposable income.
Naamsa hopes to see further interest rate cuts in 2025 that would support vehicle affordability across the majority of segments.
“The domestic outlook for 2025 is expected to improve, driven by a revival in business and consumer sentiment stemming from improvements in the country’s key economic indicators,” said the association.
“The South African Reserve Bank stated that risks to the country’s growth outlook are assessed to be balanced, but that growth could be higher from 2025 onwards, given ongoing reforms, especially in the network sectors, such as electricity and transport.”
With an improved GDP growth rate of around 1.5% projected for 2025, the new vehicle market is estimated to improve by single digits compared to the level of 2024.
Looking at the bigger picture, geopolitical risk is anticipated to overtake inflation as the primary risk factor in 2025.
In anticipation of great uncertainty about the US economy in 2025, the economic outlook for the Group of Seven [G7] developed economies shows only modest growth across notable territories.
Another unpredictability stems from the multitude of elections around the globe in 2024 that saw a change of guard in many countries.
The impact of this will vary, “but could potentially upend parts of the global economy and raise potential risks which companies and investors need to navigate,” highlighted Naamsa.
Any escalating trade tensions are likely to impact US interest rates and drive the dollar higher, which will have a direct impact on things such as local fuel prices.
That said, the expected ongoing easing of monetary policy in the South African automotive industry’s key export markets could see export momentum turn positive again over the medium term.
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