EU woes fail to dent SA vehicle sales rise

South African vehicle sales growth accelerated last month, as the lowest interest rates in more than three decades spurred consumer spending and vehicle rental firms replenished their fleets, an industry group said.

Sales rose 18.3 percent from a year earlier to 54 067, the National Association of Automobile Manufacturers of SA (Naamsa) said yesterday. Sales growth increased from 15.6 percent in June. The median estimate of three economists surveyed was 14.2 percent.

Vehicle sales growth has quickened even as a debt crisis in Europe, which buys about a third of South African manufactured exports, curbs growth in the local economy.

The economy should expand 2.7 percent this year, down from 3.1 percent last year, according to the government and central bank.

“Despite prospects of further slowing in the domestic economy, the automotive sector continued to perform remarkably well,” with domestic sales estimated to increase by 10 percent for the full year, the association said.

Sales were supported by “historically low interest rates, further improvement in vehicle affordability in real terms and improving demand for credit by households and businesses”.

The Reserve Bank cut its benchmark interest rate by half a percentage point to 5 percent on July 19 to help support the economy and boost consumer spending. Borrowing by households and businesses increased by 8.7 percent in June, up from 8.3 percent a month earlier, the bank said on Monday.

Wessel Steffens, the head of vehicle and commercial asset finance at Absa, said there could be some boost for consumers after the cut in interest rates last month.

“This obviously applying on debt with prime-linked rates, and not fixed rates. Interest rate sensitive sectors in the economy, such as the vehicle sector, will at best be supported by the rate cut, while little stimulus is expected to occur,” Steffens said.

Passenger-car sales increased 18 percent last month from a year earlier to 37 844, with rental companies accounting for 16.5 percent of sales.

Purchases of light commercial vehicles rose 21 percent to 13 781. Sales of heavy trucks and buses rose 9 percent to 1 619 units. But medium commercial vehicles, buses and trucks sales fell from 2 541 in June to 2 442 in July.

“The momentum of industry-export sales should improve further over the balance of the year as various vehicle-export programmes were ramped up, particularly exports of light commercial vehicles,” Naamsa said. – Bloomberg and Sapa