Vehicle sales in first gear
New vehicle sales last month register positive growth only for the second time this year, but analysts believe it is not on the road to recovery yet.
Jo-Maré Duddy – September brought a spring in buyers’ step, registering the highest number of new vehicle sales in Namibia so far this year.
The 874 new vehicles leaving showrooms also meant positive annual growth for the sector, a feat which has only been accomplished twice this year. In February, positive year-on-year growth was achieved too.
Compared to September 2019, last month’s figure represented an increase of 8.4%. The sales were 47.4% higher than those of August this year.
The surge was driven by new light commercial vehicle sales, which accelerated by 32.6% compared to a year ago. Light commercial vehicles also include bakkie sales.
A further possible driver for the strong growth was changes to the Credit Agreements Act, which became effective last month, Cirrus Securities says. The amendments extended vehicle loan repayment facilities from the current maximum of 54 months to 72 months.
“The extension, in the context of historically low interest rates and increased bank marketing (specifically for vehicle financing), may well have been a trigger for the release of pent up demand from preceding months,” Cirrus says.
SUSTAINED SURGE UNLIKELY
Except for light commercial vehicles, sales in all other categories contracted on an annual basis. New passenger car sales grew by -13.1%, medium commercial by -40% and heavy commercial by -21.4%.
According to IJG Securities, new passenger vehicle sales last month reached its lowest level since June 2004 on a rolling 12-month basis, highlighting the severity of the slowdown in sales.
“Consumer confidence has been plagued by poor economic conditions since 2016 and this has been further impacted by job losses and pay cuts this year brought on by Covid related lockdowns,” IJG says.
Analysts warn that a sustained increase in new vehicle sales are unlikely.
Simonis Storm cautions against getting “overly excited” that the sector has turned a corner.
“Expectations for full-year vehicle sales remain weak, as households continue to be characterised by the risk of retrenchments or wage reductions, high debt levels (relative to disposable income), and greater difficulty accessing finance given the riskier macro environment,” Cirrus said.
“Moreover, new vehicle sales will also continue to be hindered by the increased supply of second-hand vehicles from the tourism industry, as many operators opt to reduce their fleet size – thereby providing a cheap substitute,” the analysts continued.
‘MULTITUDE OF OBSTACLES’
IJG commented: “Consumers have been under pressure for a number of years now as the economy started to cool in 2015 after five years of rapid growth between 2010 and 2015. A slowdown in government spending in real terms, coupled with a halt in foreign direct investment brought on by poor policy guidance have resulted in a stagnant economy and as a result erosion of consumer and business confidence. This stagnation has been further exacerbated by lockdown measures aimed at slowing the spread of Covid 19.”
IJG continues that a “multitude of obstacles thus weigh on a return to growth for the Namibian economy, not least of which is the poor policy overhang”.
“We thus expect the Namibian economy to remain fragile for the foreseeable future, and we expect this to be reflected in vehicle sales, building plan approvals as well as PSCE [private sector credit extension] and other high frequency indicators,” IJG says.
The 874 new vehicles leaving showrooms also meant positive annual growth for the sector, a feat which has only been accomplished twice this year. In February, positive year-on-year growth was achieved too.
Compared to September 2019, last month’s figure represented an increase of 8.4%. The sales were 47.4% higher than those of August this year.
The surge was driven by new light commercial vehicle sales, which accelerated by 32.6% compared to a year ago. Light commercial vehicles also include bakkie sales.
A further possible driver for the strong growth was changes to the Credit Agreements Act, which became effective last month, Cirrus Securities says. The amendments extended vehicle loan repayment facilities from the current maximum of 54 months to 72 months.
“The extension, in the context of historically low interest rates and increased bank marketing (specifically for vehicle financing), may well have been a trigger for the release of pent up demand from preceding months,” Cirrus says.
SUSTAINED SURGE UNLIKELY
Except for light commercial vehicles, sales in all other categories contracted on an annual basis. New passenger car sales grew by -13.1%, medium commercial by -40% and heavy commercial by -21.4%.
According to IJG Securities, new passenger vehicle sales last month reached its lowest level since June 2004 on a rolling 12-month basis, highlighting the severity of the slowdown in sales.
“Consumer confidence has been plagued by poor economic conditions since 2016 and this has been further impacted by job losses and pay cuts this year brought on by Covid related lockdowns,” IJG says.
Analysts warn that a sustained increase in new vehicle sales are unlikely.
Simonis Storm cautions against getting “overly excited” that the sector has turned a corner.
“Expectations for full-year vehicle sales remain weak, as households continue to be characterised by the risk of retrenchments or wage reductions, high debt levels (relative to disposable income), and greater difficulty accessing finance given the riskier macro environment,” Cirrus said.
“Moreover, new vehicle sales will also continue to be hindered by the increased supply of second-hand vehicles from the tourism industry, as many operators opt to reduce their fleet size – thereby providing a cheap substitute,” the analysts continued.
‘MULTITUDE OF OBSTACLES’
IJG commented: “Consumers have been under pressure for a number of years now as the economy started to cool in 2015 after five years of rapid growth between 2010 and 2015. A slowdown in government spending in real terms, coupled with a halt in foreign direct investment brought on by poor policy guidance have resulted in a stagnant economy and as a result erosion of consumer and business confidence. This stagnation has been further exacerbated by lockdown measures aimed at slowing the spread of Covid 19.”
IJG continues that a “multitude of obstacles thus weigh on a return to growth for the Namibian economy, not least of which is the poor policy overhang”.
“We thus expect the Namibian economy to remain fragile for the foreseeable future, and we expect this to be reflected in vehicle sales, building plan approvals as well as PSCE [private sector credit extension] and other high frequency indicators,” IJG says.
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