New vehicle sales drop as repo rate bites

Namibia recorded a 13,2% month-on-month drop in the demand for new vehicles from 1 260 units sold in July down to 1 094 units in August.

However, on an annual basis, new vehicle sales improved by a meagre 4,0% year on year (y/y) in August – much lower than the consistent double-digit growth figures witnessed in August 2022.

According to economic analysts Simonis Strom Securities, annual vehicle sales grew by an average of 29,5% year to date (YTD).

The resilience of local demand for vehicles set a remarkable YTD average of 1 099 vehicles sold per month in 2023, the highest it has been since 2018.

“This is largely due to demand from individuals purchasing through dealerships – accounting for 92% of sales YTD, but also due to increasing demand from rental companies taking up the remaining 8% of sales YTD.

“Dealerships purchased 1 092 vehicles, a rise of 14,1% y/y, while rental companies purchased two vehicles in August,” Simonis says.

According to Namibia Statistics Agency (NSA) data, vehicle inflation recorded a year-on-year increase of 7,6% in August 2023, although an analysis provided by the National Association of Automobile Manufacturers of South Africa (Naamsa) shows that passenger vehicles recorded a more pronounced inflationary trend, with an average 10,9% y/y increase.

“This surge is primarily propelled by passenger vehicles sales that rose 13,1% y/y, light commercial vehicles up 13,6% y/y, medium commercial vehicles rising 25,6% y/y, and extra-heavy commercial vehicles sales up 16,0% y/y, while the average price of heavy commercial vehicles witnessed a decline of 13,5% y/y in August 2023,” the analysts say.

Simultaneously, the spare parts industry has encountered an upswing in sales during August, as evidenced by the modest uptick in annual prices.

This signifies a preference among vehicle owners for the repair of their existing vehicles as opposed to acquiring new ones.

However, for those who do opt for new vehicle acquisitions, the consumers are purchasing vehicles cash, and according to estimates, 59% of vehicle purchases in August 2023 were conducted through cash transactions, while 41% were financed.

This shift in consumer behaviour can be attributed to the elevated repo rate of 7,75% and prime rate of 11,5%, which have acted as deterrents, discouraging consumers from seeking vehicle loans due to the associated burden of higher interest rate payments.

Nominal vehicle financing has dropped 29,2% y/y in 2017, and increased by 23,3% from 2017 to 2022.

“When adjusting for inflation, the real growth of financed vehicle assets has remained relatively stagnant, averaging at -2,5% y/y in 2022 across all banking institutions,” Simonis says.

Currently, the new vehicle market is experiencing a resurgence, driven by improvements in the supply chain landscape, and dealers have reported that new vehicle sales constitute 80% of total sales.

– email: matthew@namibian.com.na

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