Car Sales in South Africa
Car sales have seen serious ups and downs in South Africa. The most binding factors that have influenced the car sales over time in South Africa are the Covid 19 pandemic, floods, inflation rates, tourism and oil prices. Let’s see below, how different types of auto sales varying year to year have been.
New Car sales:
The number of total new cars sold yearly was 557704 units in 2017, 552227 units in 2018 536612 units in 2019, fell low to 380207 units in 2020 and then rose again to 464493 units up to August in 2021.
Reflecting on the new vehicle sales statistics for the month of August 2022, the new vehicle market’s performance remained remarkably stable despite the increasingly challenging economic conditions.
Aggregate domestic new vehicle sales in August 2022, at 47,420 units reflected an increase of 14,2% in August 2021. Overall, out of the total reported industry sales of 47,420 vehicles, an estimated 86.2% represented dealer sales, an estimated 8,3% represented sales to the vehicle rental industry, 4,3% to industry corporate fleets, and 1,2% sales to government.
The August 2022 new passenger car market had registered a gain of 14,6% compared to new cars sold in August 2021. The car rental industry accounted for 11,2% of sales in August 2022. Domestic sales of new light commercial vehicles, bakkies and minibuses at 13,281 units during August 2022 had recorded a gain of 13,1%, from August 2021. The new vehicle market remained resilient despite increasingly tough economic conditions via elevated inflation and the upward trend in interest rates which are eroding households’ spending power and present an affordability challenge to consumers.
Annual consumer inflation reached a 13-year high, increasing to 7,8% in July 2022 and further interest rate hikes are anticipated for the remainder of the year. However, the car rental business continued to support the new vehicle market as the tourism sector is starting to stabilize after the lifting of all COVID-19 lockdown restrictions in the country. Domestic demand is also likely continuing to benefit from the reopening effect while an easing in the intensity of loadshedding meant that conditions in the manufacturing sector improved in August 2022.
Reflecting on the new vehicle sales statistics for the month of August 2020. Aggregate domestic sales at 33 515 units continued the status quo and reflected a decline of 26,3% in August 2019, although the performance of the medium and heavy commercial vehicle segments surprised on the upside. Overall, out of the total reported industry sales of 33 515 vehicles, 92,1% represented dealer sales, 4,2% sales to government, 2,9% to industry corporate fleets, and an estimated 0,8% represented sales to the vehicle rental industry.
The August 2020 new passenger car market at 19 545 units had registered a decline of 9 458 cars compared to the 29 003 new cars sold in August last year. The contribution by the car rental industry remained negligible and comprised only 0,04% in August 2020 compared to the 18,0% in August 2019. Domestic sales of new light commercial vehicles, bakkies and minibuses at 11 336 units during August had recorded a decline of 2 719 units from the 14 055 light commercial vehicles sold during the corresponding month last year.
Yearly sales comparisons appear to be beginning to show a consistent trend, indicating some form of stability returning to the new vehicle market. New vehicle sales in August were the second-best performing sales month to date in 2022, just as they were last year at this time. August recorded 47,420 new vehicle registrations, 14.2% higher than the same month last year.
While more interest rate increases are inevitable this year, demand in the new vehicle market continues to grow.
That demand was clearly evident in August sales with shared successes across the passenger cars and light commercial vehicle (LCV) sectors. The performance came from consumer demand as rental sales were down 23.7%, albeit still contributing 3,912 units to the overall market volume.
Used Car Sales:
The appeal of the pre-owned market in 2021 appears to be waning, due to price inflation. Where the pre-owned market has been offering affordability solutions for cost-conscious consumers, the average deal size on a used car has increased over 10% year-on-year, while the value of finance agreements on new vehicles over the same period is static.
This will be fueling the new vehicle market as the replacement cycle comes under pressure and motorists require a new mobility solution to combat the rising operating costs of older vehicles.
New cars financed amounted to 59,096, versus used vehicles, at 119,061.
Year-to-date, new vehicle sales are up 13.8% to 344,244 units, showing reassuring signs of the market’s continued recovery.
With the Covid-19 pandemic and volatile geopolitical tension affecting new car supplies, SA’s used car market has grown over the years.
The war between Russia and Ukraine has affected the supply of new cars.
Coupled with the floods that KwaZulu-Natal suffered in April and May 2022, which affected Toyota. During 2021, buyers in the secondhand car market looked for vehicles between R200 000 to R300 000
The average price worked out to R236 900, which is slightly higher than the average in 2020. The R200 000 to R300 000 segment alone accounts for 20.6% of enquiries received with the segment for cars priced between R150 000 and R200 000 slotting into second place, with a share of 16.34%.
In third place is the R300 000 to R399 000 segment, with an 11.82% share of enquiries.
He said there was a growth in terms of enquiries made for vehicles with higher mileage, with the bulk of enquiries made were for vehicles first registered between 2014 and 2018.
Volkswagen, Toyota and Ford are South Africa's top three used car brands, based on enquiries received.
BMW and Mercedes Benz come in at fourth and fifth place.
Car Rental and Leasing Sector :
Revenue in the Car Rentals segment is projected to reach US$283.70m in 2022.
Revenue is expected to show an annual growth rate (CAGR 2022-2026) of 6.31%, resulting in a projected market volume of US$362.40m by 2026. In the Car Rentals segment, the number of users is expected to amount to 2.7m users by 2026. User penetration is 3.3% in 2022 and is expected to hit 4.3% by 2026. The average revenue per user (ARPU) is expected to amount to US$141.30. In the Car Rentals segment, 58% of total revenue will be generated through online sales by 2026.
The South African car rental market had total revenues of $154.8m in 2020, representing a compound annual rate of change (CARC) of -19.4% between 2016 and 2020.
The car rental industry's revenue grew by 3.6% in 2017 reaching an estimated total of R5.2bn. The industry continued to be driven by business car rental, which accounted for 53% of the value of all sales. The leisure market remains an important sector and during 2017 there was an increase of 16.7% in car rentals by international visitors and a 1.6% growth in local leisure rentals following on from growth of 22% and 12% respectively in the foreign and local leisure segments in the previous year.
South Africa's car rental industry experienced zero growth in 2018 and marginal nominal growth in 2019. While the weak economy caused rental volumes in the corporate, government, local leisure and insurance replacement subsectors to contract in 2019, declining international and domestic tourism numbers placed even further pressure on the stagnating industry. The main business channels for car rentals are corporate, government, insurance replacement and leisure, and demand from all of these avenues declined markedly since March 2020.
Car rental companies have been able to partially offset losses by reducing fleet, branch and employee numbers, and have benefited from an increase in second-hand vehicle prices. The industry's fleet had more than halved by July 2021 from February 2020. The sector, which is described as mature, has been under pressure for the past two years as brokerages and online intermediaries have driven prices down.
The coronavirus pandemic and lockdown in South Africa had forced car rental companies to cancel all bookings. The lockdown and travel ban seriously affected car rental companies, which waived cancellation fees or issued rental vouchers for cancelled bookings and closed their doors.
The industry had continued to benefit from partnerships with airlines, tourism companies and accommodation providers, while investment in technology had helped reduce operational costs and improve customer service delivery and satisfaction.
Car rental and leasing companies are looking to take advantage of a growing trend of customers who would rather rent than own a vehicle. Ridesharing, digital aggregators and car subscriptions provide car rental businesses with alternative revenue streams. Ridesharing, where car owners rent out their own vehicles, gained popularity in recent years, but was slowed by the pandemic.
Utilization of rental and leased vehicles for executing jobs in app-based taxi market, increase in tourism in the country due to the roll-out program for e-visas in South Africa and the low valuation of Rand, rising number of middle-income families and the improving economic scenario are some other key factors that are expected to drive South Africa car rental and leasing market. In the long run, logistics and courier companies are expected to continue to be the major end user, followed by the mining company executives.