Notable dip in vehicle sales in November

November 2023 witnessed a substantial downturn in new vehicle sales, marking the most significant drop since the market's recovery in 2021.

With a 9.8% year-on-year decrease to 45 075 units, this November downturn in vehicle sales represents the sixth consecutive month of declining sales, reflecting economic challenges for both motorists and the motor industry.

The volatile energy crisis, coupled with a high-interest rate environment, continues to impact consumer confidence, prompting a notable shift towards used vehicle interest. Explore the factors contributing to this downturn and the potential implications for the industry in the coming year.

According to data from naamsa | the Automotive Business Council, sales dropped by 9.8% year-on-year, amounting to 45 075 units. This decline extends the trend, marking the sixth consecutive month of shrinking sales and the fourth consecutive month of negative growth.

While November sales hovered close to the median range for 2023 volumes and were only 385 units less than October sales, the year-to-date growth softened significantly to 0.8%. The landscape is further complicated by the ongoing energy crisis, contributing to consumer and business uncertainty.

Despite a reprieve from interest rate increases in November, the general outlook suggests a persistently high interest rate environment impacting household debt until the middle of the following year.

Lebo Gaoaketse, head of marketing and communication at WesBank, notes that while the stable interest rates offer some relief to indebted consumers, the combination of high lending rates, inflation, and relatively lower household income continues to restrain significant purchases like new vehicles. The energy crisis adds a layer of complexity, impacting consumer and business confidence.

WesBank’s data reveals a significant increase in applications for used vehicles, outnumbering new vehicle applications two to one. Gaoaketse emphasises that this shift towards used vehicles has been a contributing factor to the decline in new vehicle sales over the past four months. Factors such as increased deal duration and contract period indicate a constrictive environment for new vehicle purchases, driven by affordability considerations and uncertainties in the socio-political landscape.

Every segment of the market experienced losses in November, with passenger car sales declining by 12.1% to 29,384 units, and the light commercial vehicle market down by 3.9% to 12 941 units.

As the year comes to a close, the focus turns to whether the new vehicle market can show any growth in 2024. The December sales will play a crucial role in determining the annual volume, but Gaoaketse emphasises that, considering the headwinds faced by the economy and the market in 2023, volumes around the mid-40 000 sales mark still present opportunities for consumers, dealers and brands alike.

Source: Wesbank


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