ECONOMIC COMMENTARY. Vehicle Sales. Economics South Africa. Total sales growth continues to points towards a rebound off a low base.

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1 ECONOMIC COMMENTARY Economics South Africa 01 November 2017 Vehicle Sales Total sales growth continues to points towards a rebound off a low base Total new vehicle sales increased to units in October, the highest volume since November Sales increased by 4,6% y-o-y, marking the fifth consecutive month of growth. Passenger vehicles sales were boosted by rental industry purchases, while commercial sales moderated after four months of improvement. Export volumes also moderated from a monthly record in September. Vehicle sales are likely to pick up in the months ahead off a low base, with the interest rate cut adding some boost, but the trend will be subdued as the adverse political and subdued economic climates dampen the recovery, while the rand s renewed weakness is likely to lift prices. Vehicle sales figures continue rebound off a low base. However, the numbers still do not indicate a strong upturn and are unlikely to have policy consequences. In the short term renewed pressure on the rand, higher oil prices and an uncertain political climate have reduced the scope for further easing. We still forecast moderate interest rate decreases in the first half of 2018, but these remain highly dependent on the rand trajectory and its impact on inflation. Table 1 : Vehicle sales & exports October M-o-m % September Nedbank forecast Market forecast Total 4,6 0,8 6,9 4,3 n/a Passenger 7,9 4,9 5,9 Commercial Total exports -2,1-8,3, including GWMSA Comment -7,3-22,3 9,1 10,9 Group Economic Unit Isaac Matshego IsaacMat@nedbank.co.za Dennis Dykes DennisD@nedbank.co.za 135 Rivonia Road Campus, 135 Rivonia Road, Sandton, 2196, South Africa New vehicle sales continued to show signs of improvement in October, increasing for the fifth month in succession, the longest run of growth since the second half of That upward trend, however, was disrupted as the overall economy was hurt by labour instability and as the drought hit the economy. This time around the vehicle market rebound faces risks mainly from renewed rand weakness following on policy and political missteps, which is likely to pressure prices. Sales totalling marked the highest monthly volume in almost two years. Passenger vehicle sales were boosted mainly by purchases by the rental industry, which accounted for 26,1% of the total in October. The commercial market contracted by 2,1% after several months of good gains. Export volumes were dragged lower primarily by a 15,1% decline in passenger vehicles shipped.

2 Chart 1 : Total sales of new vehicles Chart 2 : Vehicle exports Outlook The vehicle market is likely to show further signs of rebound off a low base over the coming months but growth is unlikely to rise strongly as household income growth remains subdued and debt levels elevated. The commercial sector will remain subject to subdued domestic fixed investment trends, which will not rebound while business confidence is low. Exports will continue to benefit from stronger demand in key markets, particularly in Europe. The National Association of Automobile Manufacturers (NAAMSA) still projects overall sales growth of around 1,5% for 2017 as a whole. Implications Vehicle sales figures continue to rebound off a low base. However, the numbers still do not indicate a strong upturn and are unlikely to have policy consequences. In the short term renewed pressure on the rand, higher oil prices and an uncertain political climate have reduced the scope for further easing. We still forecast moderate interest rate decreases in the first half of 2018, but this remains highly dependent on the rand trajectory and its impact on inflation. Economic Commentary 01 November 2017 Page 2 of 6

3 Table 2 : Breakdown of vehicle sales Total Passenger Commercial Q Q Q Q Q Q Q Q Q Q Q Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Economic Commentary 01 November 2017 Page 3 of 6

4 Table 3 : Breakdown of commercial vehicle sales Light Medium Heavy commercials commercials commercials Q Q Q Q Q Q Q Q Q Q Q Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Economic Commentary 01 November 2017 Page 4 of 6

5 Table 4 : Breakdown of vehicle exports Total Passenger Commercial Q Q Q Q Q Q Q Q Q Q Q Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Economic Commentary 01 November 2017 Page 5 of 6

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