Wesbank says it identified several worrying consumer trends emerging in the industry as a result of political and economic uncertainty in South Africa.
New vehicle sales for May this year saw a year-on-year decline of 2.6%, according to the National Association of Automobile Manufacturers of South Africa (Naamsa). Year-to-date sales volumes in April shrunk by 1.4%.
According to Rudolf Mahoney, head of brand and communications for WesBank his bank forecasted marginal growth for 2017, “which was made with expectation of a stable economic environment… However, political and economic uncertainty have affected this outlook, as well as consumer buying behaviour.”
Mahoney says normally May would be a favourable month for sales, with four more working days than April and one more working day than the same period last year. “Yet despite this, overall sales declined. We can only attribute this to uncertainty among buyers.”
BusinessTech.co.za reports that several indicators of this uncertainty among consumers can be seen in WesBank’s data. In May, there were year-on-year increases for average deal duration in both the new and used market.
Statistics showed that consumers were hesitant to replace their vehicles, with the replacement cycle extending by 9% compared to May last year.
Those who did return to the market chose to manage risk by opting for fixed interest rates, to avoid potential future rate hikes. Data from WesBank shows a 19% increase in demand for fixed interest since South Africa’s economy was downgraded to junk status.
Affordability and value-for-money also continue to factor into purchase decisions.
Demand for balloon payments has risen 13%, year-on-year, showing that consumers are seeking ways to lower monthly instalments.
The demand for used vehicles continued unabated, with the used-to-new ratio reaching 2.37-to-1 in the past month.
Applications volumes for new cars reached 39,637 in May, versus 93,924 applications for used vehicles.
The bank noted that that the average value of a new car financed last month hit R295,500, up from R279,116 a year ago.
“A lot of uncertainty exists as a result of recent economic developments, making it difficult to accurately predict the outlook for the motor industry for the remainder of the year,” said Mahoney. “For consumers in the market the picture is a lot clearer, though: spend wisely and try to hedge your risks.”