New vehicle sales for July increased by 7.5% year-on-year, with 58 140 units sold in the month, data released by the Department of Trade and Industry, on Thursday, showed.

The National Association of Automobile Manufacturers of South Africa (Naamsa) stated that new vehicle sales continued to be in line with industry expectations.

The growth in sales was boosted by the rental market, which recorded an increase of 24% compared with sales for July 2012. Passenger cars remained positive, with sales growth of 6.4% year-on-year, while light commercial vehicle sales outperformed the market with growth of 9.2% year-on-year.

Out of the total reported industry sales, 80% represented dealer sales, 11.4% represented sales to the vehicle rental industry, 4.6% to industry corporate fleets and 2% to government.

During July, 40 274 new cars were sold, which marked a gain of 6.4%, compared with the 37 844 new cars sold in the corresponding month in 2012.

The strong contribution by the car rental industry to the July sales totals was expected to continue over the next two months.

Sales of industry new light commercial vehicles, bakkies and minibuses, at 15 047 units, reflected an increase of 9.2% compared with the 13 781 light commercial vehicles sold during July last year.

Sales in the medium- and heavy truck segments at 990 units and 1 829 units, respectively, had recorded a yearly increase of 19% in the case of medium commercial vehicles and 13% for heavy trucks and buses.

Naamsa said the good performance in light, medium and heavy trucks sales was indicative of higher levels of investment spending and was, in part, related to infrastructural development projects.

New vehicle exports during July totalled 26 608 units, a modest decline of 3.6% on the 27 602 vehicles exported in the equivalent month last year. Despite this, the industry remained on target to achieve new vehicle export growth of about 18% in volume terms during 2013.

On the domestic front, Naamsa expected subdued economic growth and above-inflation new vehicle price increases to contribute to a more difficult trading environment.

“While the outlook for the automotive sector for the balance of the year appeared less promising than at the beginning of 2013, the year, as a whole, would still represent the second-or third-best year on record with aggregate sales of about 660 000 vehicles versus the record of 714 000 achieved in 2006,” the association said.

It further indicated that the prevailing low interest rate environment would continue to lend support to the domestic market. Other positive factors included replacement demand, the highly competitive trading environment, ongoing attractive incentives and high-technology new model introductions. Over the medium term, pre-emptive buying by consumers to avoid possible further increases in prices of new motor vehicles, as a result of the weaker rand, was also anticipated to lend support.

Further, Naamsa noted that export sales remained a function of the performance and direction of global markets.

“Vehicle exports into Europe remained under pressure as a result of the recession in the Euro Zone; however, substantially higher exports to North America, Asia and Africa should enable the industry to achieve record exports in 2013 at around 337 000 vehicles, compared with the 277 893 vehicles exported in 2012,” the agency added.

WesBank motor division GM Cyril Zhungu said in a note to clients that consumer demand remained positive. July recorded the second-highest figures, with 116 500 car financing applications received, representing year-on-year growth of 9% compared with July last year.

However, he pointed out that contract periods had increased marginally from 68 to 69 months on new and used cars. “We have also observed an increase in the demand for balloon payments, which has increased by 19% from January to July,” Zhungu said, adding that this pointed to the fact that consumers were using the structure of the finance agreement to maintain the affordability of the monthly repayments.

“In addition, we observed the average transaction value on new cars continuing to increase, recording an 11% rise over the past year. This is in line with the Transunion Auto CPI Index, which indicates that new car prices have increased in line with the rand depreciation against the dollar, which has influenced the adjustment on new car prices. The price inflation on used cars is negative, which is expected to support demand for used cars.”

The price gap between new and used cars was resulting in the used to new ratio moving in favour of used vehicles, revealing a figure of 1.23:1 in July. But, Zhungu said the increase in the ratio was being offset by aggressive marketing activity by manufacturers, who were providing attractive offers on new cars, including trade-in assistance, cash back offers and discounts.

“WesBank foresees the market remaining positive for the remainder of this year, with a slight increase in activity in the used car market. We believe that the biggest factor in the foreseeable future will be the effect of a depreciating rand and the ability of the manufacturers to maintain marketing activity in order to support vehicle sales,” he indicated.