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Tuesday 12 November 2019
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Wheels coming off the car industry as depression bites

By Megameno Shikwambi

Vehicle sales have plummeted as a result of a decline in passenger and light commercial vehicles, latest statistics have shown. According to the National Association of Automobile Manufacturers South Africa (NAAMSA), Namibia’s new vehicle sales numbers for June 2019 declined by 7.4% month-on-month to 977 units, following a significant increase of 13.9% recorded in May 2019.
On an annual basis, vehicle sales declined by 13.1% in June 2019, dipping again after a rise of two months.
According to Simonis Storm economists, the drop in vehicle sales can be ascribed to a decline in passenger and light commercial vehicles (LCV) by 18.0% year-on-year and 13.6% year-on-year to 378 and 519 units in June 2019.
“The decline in vehicle sales is an indication of a struggling motor vehicle industry resulted by low consumer spending. Furthermore, borrowing through instalment credit has been in contraction since 2017 to an all-time low of -7.7% in December 2018,” the firm said in its latest report.
Simonis Storm observes that in 2018, worldwide sales of passenger cars and light commercial vehicles decreased by 0.5% for the first time since 2009.  Germany’s Centre for Automotive Research (CAR) expects this trend to continue in 2019, with global vehicles sales forecasted to fall by more than 4.0mn units.
Simonis Storm has warned that the decline in new vehicle sales across the globe could worsen as US-China trade tension escalates. “On the 18th of May 2019, the US has delayed imposing tariffs on imported vehicles and parts from EU countries, Japan and other nations for 180 days. This creates uncertainty in the vehicle industry and it is exacerbated by harsher CO2 regulations. Similarly, the same trend can be observed in South Africa with new vehicle sales continuing to disappoint, recording a -5.7% y-o-y to 40 506 units in May 2019,” the firm said.
Simonis Storm’s view is that Namibia will follow the same trend.
“Therefore, we reiterate our forecast of an annual decline in total vehicle sales of 4.5% to 11 500,” said the firm.
Key Reasons for depressed vehicle industry According to the experts, key reasons for this contraction are manifold and range from the change in consumer spending priorities, low instalment credit and falling demand for new cars, with a shift to second hand vehicles.
“Our view is that the tourism impact for this year will be less compared to 2018 and the motor vehicle dealerships are likely to face tough times for the rest of the year. Over the last 5 years preference has shifted from passenger vehicles to LCV, with weighting dropping to 39.0% from 42% in passenger vehicles and increased to 53% from 51% in LCV. Consumer confidence is waning, and focus has turned to the consumption of necessities rather than luxury goods. The contraction in economic growth has worsened the situation,” the firm observes. Passenger vehicles which accounts for 39% of total vehicles, declined by 26.2% m-o-m and 18.0% y-o-y to 378 units in June 2019. According to Simonis Storm this is below its 22 years’ average of 410 units. The decline can be attributed to a 60.5% drop in Volkswagen vehicles from 200 units in May to 79 units in June 2019. Toyota passenger vehicles also dropped by 8.6% month on month to 139 units in June 2019. Despite the decline seen in June, YTD ending June, passenger vehicles increased by 5.8% compared to the same period last year. Light commercial vehicles (LCV), which accounts for 53% of total vehicle sales, increased by 9.9% month on month to 519 units in June 2019. However, on an annual basis, LCV declined by 13.6%. Volkswagen and Isuzu added 28 and 55 units to the market in June 2019 compared to 10 and 40 units recorded in the prior month. Toyota, on the other hand registered a drop in LCV‘s by 5.0% month on month to 259 units in June 2019.
“The weak economy has affected the commercial vehicle category which includes buses, medium commercial, heavy and extra heavy vehicles. This category is down by 15.5% YTD ending in June 2019 when compared to the same period last year. Commercial activities have subsided since 2017 and any uptick in activities will be minimal and limited to the road and construction sector in 2019. Scania and Volvo trucks topped the import list in June 2019,” said Simonis Storm. Toyota remains dominant in terms of market share in Namibia; however its market share has dropped to 42.9% year to date ending June 2019 compared to 50.4% market share seen during the same period last year. VW has picked up market share of 17.0% YTD compared to 16.4% in 2018. It is believed that the uptick in VW can be attributed to the continuous innovation following their strategy to grow the SUV segment.  The introduction of new models since the beginning of the year increased volumes. VW’s new SUV – the T-Cross could grow the current market share further.




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