Vehicle sales are expected to grow by 1.74% in 2017 with government purchases significantly expected to drive sales. This was according to vehicle and asset finance provider WesBank.
CEO Chris de Kock said there are a number of large government tenders set to be awarded in the coming months and that this will boost sales.
Government purchases “will account for 3.3% growth in light commercial vehicle (LCV) sales and help limit the sales decline for commerce vehicles,” he said. “Additionally, tourism will drive the sales growth in the rental market, which will ensure 1.3% growth for passenger car sales.”
Despite a difficult past 12 months and a challenging year ahead, WesBank is confident that South Africa’s economy will see positive but subdued growth going into 2018.
Inflation is expected to settle down within the upper part of the Reserve Bank’s target band, which will result in the current repo rate remaining stable at 7%.
The Rand has also recovered from its 2016 lows, aided by political and economic policies in global markets, and should hold its ground through to 2018, the bank said.
WesBank forecasts that the passenger car market will grow by 1.29%, to 365,926 units in 2017, with LCV sales increasing by 3.32%, to 164,488 units.
Rudolf Mahoney, Head of Brand and Communications at WesBank said that growth in the industry is always positive, however the January result should not be seen as indicative of a trend for this year.
“Consumer budgets remain under pressure, as seen in the dealer channel sales, and we should not rely on continued double-digit growth in the rental channel,” he said.
WesBank’s data shows that demand for new vehicles declined slightly in January, with applications down 1% year-on-year.
WesBank noticed that consumers are choosing to hold onto their vehicles for longer, either due to negative sentiment and unwillingness to take on new debt, or due to affordability concerns.
The bank also said that demand for used cars remains strong according to application volumes, which grew 7.3% compared to January last year. Used vehicle finance applications outnumbered new vehicle finance applications 2,5:1.
“WesBank anticipates that vehicle price inflation and interest rates will remain stable throughout 2017, which will go some way to restoring consumer confidence,” the bank said in a statement.
“However, fuel prices could start playing a bigger role in consumers’ mobility costs this year, which will negatively affect affordability.”
Mahoney said: “Our advice to consumers looking at entering the car market is to budget carefully and factor in all costs associated with owning and operating a car.
“This includes not just the monthly instalment and insurance, but also variable expenses such as fuel and maintenance,” he added. “Planning for these will alleviate pressure on household budgets, especially as those costs increase over time.”
