The 2024 Festival of Motoring served up an abundance of good news for motoring enthusiasts, including the local unveiling of several new internal combustion engine (ICE) and EV models, amongst these the new Ford Mustang and VW T-Cross, as well as Jetour J6 and BYD Seal EVs.
Product launch activity is bound to stimulate the country’s new vehicle market, which is primed for improved recovery, according to WesBank CEO Ghana Msibi’s opening address at the event.
Giving his perspective on the status of the local automotive industry, Msibi believes the industry’s resilience through the prolonged economic downturn is about to pay dividends.
“When analysing the performance of the industry, there are clear patterns emerging to indicate that the new vehicle market is in the trough of the current cycle, which started even before the onset of the COVID-19 pandemic. The worst is behind us,” said Msibi. “What lies ahead is the start of the road to recovery: not robust growth in the initial phase, but rather shallow gains in certain pockets,” he said.
Identifying the catalysts for the anticipated growth, Msibi cited the naamsa new car sales data from 2019 when total annual sales reached 529 293. Annual sales of 531 933 new vehicles in 2023 compared favourably, reflecting the market’s resilient recovery but assisted substantially by the introduction of new value-oriented brands – a trend that he believes will continue as the market attracts even more new players from the Far East.
“The industry also stands to benefit from the relative stability that has set in since the formation of the Government of National Unity (GNU), as well as the significant improvement in the country’s energy availability factor. Plans to unlock the full potential of the country’s ports are also expected to assist heightened vehicle price inflation, prolonged deterioration of the local currency, and marginal economic growth,” said Msibi.
Providing a macro-economic view, Msibi highlighted the potential impact of the US Federal Reserve on South Africa’s own Monetary Policy Committee (MPC) vote on repo rates.
“The signs strongly point to a US Federal Reserve decision to cut the lending rate to a low of 3,25% over the next two years, driven largely by the pullback in inflation in that country. We expect this to start with a modest 25 basis points cut announcement the day before the meeting of South African’s MPC, which we hope will take a similar approach in the face of improved Consumer Price Index data.
“Significantly, two members of the MPC voted for a reduction in the repo rate in its most recent meeting held in July. This was the first time in years that any member took such a stance, and is a strong indicator that we’ll see a welcome reduction in rates for indebted consumers in September.
“Should conditions remain stable or improve, SA should expect a repo rate cutting cycle, which will likely come as a series of 25 basis-point cuts, reaching a cumulative 125 basis points drop by the end of 2025,” said Msibi.
“The impact of the relief in interest rates might not seem significant in relation to what consumers pay towards their monthly car installment. However, the net saving from all debts, including home loans and credit card debt, will be significant, unlocking more buying power that will initially benefit used car sales numbers as well as demos.
“We don’t expect a significant increase in the size of the local automotive market in the near term. Instead, we expect to see a continued shift in market share in favour of new value-oriented brands. From a WesBank perspective, we’ve already seen Asian brands growing their share to about 26% of all new vehicle purchase activity, and we expect that to continue over the coming months.
“Unless there’s a fundamental change somewhere in the economy, whoever prices better will continue to get the customer’s vote,” Msibi concluded.
