02 November 2018
Car sales outlook is bleak
- Though data for October from Naamsa shows a rebound in vehicle sales after the contraction in September, our near-term outlook for car sales growth performance remains unfavourable partly due to headwinds facing consumers such as the weak SA labour market and elevated fuel prices.
- Since April, SA has suffered various fuel price shocks. We use regression modelling to show that the cost of fuel has a negative, though moderate, impact on new passenger car sales volumes and dealer revenues. According to our model, a 10% shock in fuel prices is associated with a 2% decrease in both sales volumes and real revenue with a nine-month time lag. Our model implies that the full impact of fuel costs will likely only happen in Q4:18. Our model also shows that consumers deciding to buy cars depends on more than just the cost of fuel. Variables such as wage growth, interest rates and car prices have a larger and a more immediate impact on vehicle sales.
- Our model implies subdued vehicle sales growth over the near term (see Q3:18 passenger sales of 30 October, by Siphamandla Mkhwanazi).
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