May sales jump a pleasant surprise, but odds may be stacked against further growth 

2nd June 2023 By: Irma Venter - Creamer Media Senior Deputy Editor

May sales jump a pleasant surprise, but odds may be stacked against further growth 

There was a general expectation in the automotive industry that new-vehicle sales would slow in May as many consumers turned their attention to investing in solar panels and inverters, instead of new cars, while businesses had to contend with increased loadshedding, as well as a tenth consecutive interest rate hike.

However, the market returned stronger than expected sales during the month, keeping the year-to-date sales total of 218 869 units at 3% above the figure for the first five months of last year. 

Exports for the same period were up 9.7%.

“The retail motor industry is, naturally, delighted at the unexpected extent of the upswing, with dealers responsible for selling 90.2% of the total volume,” says National Automobile Dealers’ Association (Nada) director Gary McCraw.

“Certain dealers focused on sales before the interest rate announcement to allow customers to take advantage of lower rates. 

“This activity, early in the month, certainly benefited sales volumes during May. 

“However, purchase consideration didn’t deteriorate after the rate increase, driven by the ongoing trend towards smaller, more affordable vehicles,” notes McCraw.

The upswing in May was significant, with new-vehicle sales increasing 10.1%, to 43 060 units, compared with the same month a year ago, while exports were up by 67.5%. 

“Prior to the release of these buoyant figures, prospects seemed rather bleak, with the latest interest-rate escalations making it difficult for consumers to make repayments on bonds and car-finance that had been doable a year ago,” explains McCraw.

“A contributing factor to the better-than-expected sales is that several brands started offering incentives to encourage new-vehicle buyers. 

“This is something we haven't seen much of since the pandemic. 

“Another factor could be that many dealers have accumulated stock and were concerned about being left with excessive inventory if the market took a downturn,” adds McCraw.

“As a result, they turned to more aggressive marketing strategies on new models.”

Going forward it will be interesting to see if the market can continue at this pace in an environment where sales growth is seen as “being somewhat against the odds”, says McCraw.