New vehicle sales in South Africa increased by 22.2% in October over the previous year according to data released by trade association Naamsa.

Naamsa said that the market has regained some momentum boosted by exceptionally strong demand in the car rental sector.

Aggregate industry sales of 44,056 units in October were 22.2% ahead of last year with cumulative sales up 23.8%.

Aggregate export sales staged a significant recovery following the widespread industrial action and associated loss of production during the previous two months. New vehicle exports for October stood at 27,338 vehicles in October, some 30.5% ahead of the same month of last year.

New car sales during October stood at 30,752 units, up 25% on last October. The October 2010 daily sales rate was lower than the daily selling rate recorded during the months of August and September. Naamsa said that was probably the result of the cost raising effect of the new car emissions tax which had been introduced on 1st September, 2010. The year-to-date improvement in car sales stood at 30.1%.

Naamsa said that factors such as a 6% decline in interest rates since end 2008, stable new vehicle prices, modest improvement in loan finance approval rates and pent up replacement demand should continue to support new vehicle sales. However, it added that the Purchasing Managers Index and the Reserve Bank’s leading indicator of economic activity 'suggested that domestic economic conditions would remain challenging'.