South Africa’s automotive market has recorded a strong start to the year, maintaining impressive monthly sales figures since January, but this may be coming to an end.
May saw 51,071 units roll off nationwide showroom floors, according to the Automotive Business Council’s (Naamsa’s) sales figures.
It was the best May figure since 2013, representing an increase of 5,784 units, or 12.8%, compared to the 45,287 vehicles sold in May 2025.
Naamsa noted that the latest positive results were achieved against a backdrop of increasing global volatility and mounting cost pressure.
“Despite emerging headwinds, consumer demand remained resilient, supported by underlying mobility requirements, replacement purchasing cycles, and a gradual improvement in household and business confidence,” it said.
“Consumers continued to engage the market in a measured and informed manner, placing greater emphasis on affordability, financing costs, fuel efficiency, vehicle utility, safety, and long-term ownership value.”
It noted that this reflects a consumer environment recovering steadily, yet remains highly conscious of total ownership-cost considerations.
Purchasing decisions have been driven by value and practicality rather than discretionary spending, underscoring the continued resilience of South Africa’s new vehicle market.
The local automotive environment has since shifted, as rising fuel prices, mounting inflation risks, and changing interest rate outlooks have introduced new pressure on household and business operating costs.
A sharp increase in global oil prices has driven local fuel costs significantly higher during April and May, contributing to an acceleration in headline consumer inflation to 4.0% year-on-year in April.
Responding to the risks, the South African Reserve Bank increased the repo rate by 25 basis points to 7.0% in May, raising the prime lending rate to 10.50%.
In a sector where the majority of purchases are credit-financed, this is likely to influence both vehicle affordability and purchasing behaviour.
A difficult road ahead
Naamsa noted the Reserve Bank’s decision, adding that while it reflects the bank’s commitment to its inflation-targeting mandate, it also marks an important shift in the domestic new vehicle market.
“The significance of the decision for the automotive sector lies in the central role that vehicle finance plays in purchasing a vehicle,” it said.
Because the majority of new vehicle transactions are financed through credit, higher interest rates will lead to increased monthly instalments for new car buyers, placing further pressure on affordability.
The marginal prime lending rate increase and market expectations suggest that a further increase remains possible later in the year.
Should this be the case, financing conditions will likely tighten further during the second half of the year.
The implications extend beyond borrowing costs alone, as higher fuel prices increase the ongoing cost of vehicle ownership, and higher interest rates raise the cost of vehicle purchases.
“This combination creates a dual affordability challenge that is likely to weigh most heavily on first-time vehicle buyers,” the council noted.
“Naamsa remains cautious about the outlook for the remainder of 2026 as households and businesses face a more challenging operating environment.”
Increasing fuel prices, increasing inflation pressure, heightened global uncertainty, and the potential for tighter financial conditions may erode consumer confidence, pressuring discretionary spending and investment decisions.
“Naamsa will continue to monitor economic developments, monetary policy trends and consumer market conditions closely, providing industry stakeholders with timely, data-driven insights into their implications for vehicle demand and overall market performance,” it said.
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