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The SA Daily 01 November 2018

Car sales gear down despite prices declining

Shireen Darmalingam

  • Q3:18 total new passenger cars sold to households through dealers declined by 1.3% y/y, to 70,108 units (our forecast: 69,583 units), from an increase of 0.57% y/y (65,160 units) in Q2:18.
  • Dealer revenue derived from sales of new passenger cars (which we use as a proxy for household expenditure on new cars) contracted by 7.2% y/y. However, household sales volumes rebounded to 7.6% q/q in Q3:18, from -13.9% q/q in Q2:18, while real expenditure ticked up to 4.5% q/q in Q3:18 from a contraction of 16.8% q/q Q2:18. Q3 household expenditure on cars therefore supports our view of a rebound in GDP growth in Q3.
  • The chart below shows that car sales have not benefited from the declining real prices of new cars, bucking the historical relationship. The estimated average real passenger car price peaked in Q3:16, and has since been trending down. Sales volumes, however, have been slow, now at those 2016 levels when the inflation-adjusted price was 5% higher. Therefore, we infer that sales being sluggish is more a demand-side than supply-side issue (see Q3:18 passenger sales of 30 October, by Siphamandla Mkhwanazi).

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