South Africans again bought fewer new vehicles in February because of high interest rates, official data showed on Tuesday, but demand is expected to pick up in the second half of 2003, Reuters reported.
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The National Association of Automobile Manufacturers of South Africa (Naamsa) said sales fell by an annual 8.6% to 27,650 units in February. Compared to January, sales were down 13.2% as February had fewer selling days.
According to Reuters, Naamsa also attributed the poor sales to the current high interest-rate environment. Prime lending rates are at 17% after the Reserve Bank raised its main repo rate by a total of 400 basis points to 13.50% last year to counter inflationary pressures ignited by the rand’s historic 37% plunge in 2001.
The rand’s subsequent sharp recovery is seen helping the fight against inflation and giving the central bank room to cut interest rates, at least in the second half of this year, Reuters said.
“In the short term, until such a time as the interest rate reductions materialise, year-on-year sales performance comparisons are likely to remain negative,” Naamsa director Nico Vermeulen told Reuters.
He said sustained rand strength, expectations of lower inflation and tax cuts of 15.1 billion rand announced in the 2003/4 budget would lift sales in the last half of the year, Reuters said.
The rand has firmed about 8% against the dollar so far this year, and manufacturers told Reuters this should keep vehicle price increases to a minimum. It was the best performing currency in 2002, gaining nearly 40% against the dollar.
“The prospects for 2003 are still reasonably good. It is most unlikely that we’ll see price increases of the order of 18%, as we did last year,” Brand Pretorius, chairman of McCarthy Motor Holdings, told Reuters.
“The substantial price hikes we saw last year are still affecting the motorist. The current high interest rates further impact negatively on vehicle affordability,” he said, according to Reuters.
Heavy truck sales were the one bright spot, rising to 777 units in February from 721 units a year ago and 521 units in January. New vehicle sales are one of the leading indicators of economic growth, Reuters noted.
According to Reuters, Naamsa said 8,780 units were exported in January, compared to 7,595 the same period a year ago. It said the industry’s export performance for the rest of the year would depend on global market conditions.
