For the third year in succession, new vehicle sales during 2016 in South Africa recorded a decline.

The South African auto industry trade body, NAAMSA, said that sales ended the year on a 'weak note' with aggregate industry new vehicle sales for December at 41,639 units, down 15.3% on the same month of 2015.

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Sales of all vehicles for the year were put at 547,442 units, some 11.4% down on 2015. Car sales in 2016 reached 361,273 units, 12.4% below 2015's level.

NAAMSA said in a statement that 2016 turned out to be "another extremely difficult year" for the South African automotive industry with domestic new vehicle sales progressively under pressure, particularly at dealer level, despite attractive sales incentives and a strong contribution by the car rental sector. It said that industry trading conditions had remained intensely competitive characterised by pressure on dealer margins.

The South African car market has declined since hitting a peak of 450,296 units in 2013 (all vehicles at 649,216 units in 2013) under the weight of economic and political difficulties faced by the country.

However, one bright spot was exports. Vehicle exports hit a record in 2016 at 344,822 units, some 3.2% ahead of 2015. NAAMSA said that assuming further improvement in the global economy, industry export sales during 2017 "could improve by some 30 000 vehicles or about 10.0% to reach a conservative projection of 375,000 export units".

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Difficult year ahead

NAAMSA also said that 2017 is expected to be another difficult year for the domestic SA auto industry. A modest improvement in new vehicle sales is expected during the second half of 2017. Industry production levels, on the back of expected further growth in vehicle exports, should however remain in an upward phase, it said

2017 projections for South Africa reflect an expected improvement in GDP growth to around 1.5% (from 0.4% in 2016), in gross domestic expenditure to over 2.0% (from -0.3% in 2016), in growth in private consumption expenditure to about 2.0% (from 0.8% in 2016) and in fixed investment to around 2.2% (from -2.5% in 2016).

Improvements in economic growth prospects are premised on the easing in drought conditions, the improvement in commodity prices and a decline in inflationary pressures on the back of a stronger rand.

On the negative side, NAAMSA noted  that domestic political tensions are likely to continue to weigh on business confidence and tax increases will also erode real purchasing power.