Vehicle finance house WesBank expects new-vehicle sales to decline by 12%, or around 34 000 units, this year, says CEO Chris de Kock.

Compared with sales of 617 691 units in 2015, sales this year will total 543 306 units, he predicts.

He says WesBank’s forecast is based on expectations of low economic growth, an increase in interest rates, a downgrade in South Africa’s credit rating and the further deterioration of the rand.

Over the next three years, the interest rate will most likely increase by 125 basis points, which should keep inflation within the Reserve Bank’s target bands.

WesBank also expects South Africa’s sovereign credit rating to be downgraded to ‘non- investment grade’, or ‘junk’ status.

Finally, the rand will continue to decline against the dollar, with WesBank forecasting that it will reach R17.20 against the greenback in 2019.

“The movement of the rand will be key for the performance of new-vehicle sales in South Africa,” says De Kock.

“A deteriorating currency will force manu- facturers to increase prices more aggressively. This will push new-vehicle price inflation well outside the headline consumer price index, thus sending more buyers to the used-car market.

“Interest rates will also play an important role in affordability and the demand for credit, as has historically been the case.”

In line with seasonal trends in the market, WesBank has staggered its forecast for 2016’s vehicle sales performance.

WesBank predicts first-half sales to be down 10% year-on-year.

The second half of the year will be tougher, mainly as a result of accelerated price increases for new cars, as well as higher interest rates.

Passenger car sales in the second half of 2016 will most likely decline 15.5% year-on-year, with light commercial vehicles (LCVs) down 10% for the same period. Sales of larger commercial vehicles are expected to slide 14.4% year-on-year as businesses opt not to replace existing assets with new units.

The full year should see passenger car sales decline by 12%, with LCV sales 10% lower than last year’s performance and truck and bus sales down 13.3%.