Steep repo rate puts damper on vehicle financing

The automotive sector is grappling with a lack of consistent performance, primarily attributed to concerns regarding consumer affordability.

This issue appears to be mirrored in Namibia as well, given that sales are decreasing on a monthly basis.

According to the National Association of Automobile Manufacturers of South Africa, demand for new vehicles in Namibia has decreased for the third consecutive month, down by 3,7% month-on-month (m/m) in September 2023, compared to -13,2% m/m in August 2023.

At least 9 848 vehicles have been sold year-to-date – the highest number of vehicles sold from January to September since 2017, noted an analysis by Simonis Storm Securities.

However, the analysts observed that elevated repo and prime rates have deterred consumers from seeking vehicle financing.

Vehicle prices have exhibited an upward trajectory of 10,0% year-on-year (y/y). Additionally, escalating global oil prices have led to a surge in fuel costs, while the overall cost of living has witnessed a similar upward trend, rendering it increasingly challenging for consumers to consider purchasing new vehicles.

Personal transport operations prices only grew marginally by 0,1% y/y in September, following a sequence of three consecutive months marked by deflationary pressures.

Engagements with various stakeholders have revealed that new vehicle acquisitions accounted for 75% of the total sales in September, mirroring the statistics of the preceding month.

“There is a noticeable decline in the proportion of vehicles being purchased on credit, with credit sales representing 36% of sales, while cash transactions accounted for 64%.

“Many local dealers are proactively offering extended payment holidays to entice potential buyers.

Additionally, the heightened demand for vehicles among businesses suggests a positive sentiment in the local market, indicating a propensity for business expansion,” noted the analysts.

Businesses and households are net borrowers of instalment and leasing credit, Simonis added.

According to the Bank of Namibia, instalment and leasing credit grew by 17,7% y/y in August 2023, compared to 16,6% y/y in July 2023 for businesses and 6,1% y/y in August 2023, compared to 6,1% y/y in July 2023 for households.

Passenger vehicle sales experienced an increase of 3,9% m/m, while commercial vehicle sales decreased by 11,3% m/m in September 2023.

On an annual basis, passenger vehicle sales increased by 4,6% y/y and commercial vehicle sales by 2,5% y/y in September 2023.

Commercial vehicle sales were primarily driven by the 458 units of light commercial vehicles, a rise of 2,2% y/y, while extra-heavy commercial vehicles sales rose by 28,6% y/y in September 2023. In September 2023, 17 medium commercial vehicles sold, down 19,0% y/y, 13 heavy commercial units were sold, down 13,3% y/y and two buses were sold.

Toyota remains the driver of the market, contributing 45% of total sales, followed by Volkswagen (12%), Kia (8%), Ford (7%) and Nissan (4%).

According to market participants, customers in Namibia are highly demanding the new Ranger Raptor Ford as 1 009 customers in Windhoek are on the waiting list.

– matthew@namibian.com.na

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