Given that vehicle import levels edged lower in recent months, Simonis Storm Securities expects shortages of both new and quality second had cars to remain a constraint on vehicle sales in Namibia.
Economist at the firm, Theo Klein last week further highlighted that local demand still exceeds supply, despite the interest rate hiking cycle.
“This implies that vehicle prices are likely to continue on an upward trend (for both new and second-hand cars), raising official inflation rates going forward as the transport category is the third largest in our consumer price basket used to calculate inflation,” he said.
New vehicle sales during June 2022 came in 12.5% higher m/m, moving slightly higher than the 6-month moving average.
The latest data shows that 866 new vehicles were sold during June 2022, compared to 770 units in May 2022 and 843 units in June 2021 (up 2.7% y/y) according to the National Association of Automobile Manufacturers of South Africa (NAAMSA). As usual, passenger and light commercial vehicles had the largest share of units sold in June 2022 with a 49.3% and 43.3% share of all units sold respectively.
“The Ministry of Trade and Industrialisation will now allow for the importation of vehicles not older than 12 years, which is above the current 8-year age limit. This initiative attempts to address the vehicle shortage in the secondary market which we have discussed in prior reports. While we commend government for being creative and trying to address market shortages, we would not advise individuals to buy older cars. These cars would likely be at higher risk of having mechanical issues, which could prove more costly to own than a newer car with less mileage.
“The importation of both passenger and commercial vehicles has recorded lower annual growth rates YTD compared to the same period in 2021. Likely exacerbated by the ongoing war in Ukraine given that Ukraine is a crucial supplier of various parts used in car manufacturing by numerous European brands. This coupled with a shortage of semiconductors which only started showing signs of improvement since last month,” further stated Klein.
Growth in new commercial vehicle sales (light, medium, heavy and extra-heavy combined) has trended slightly below overall new vehicle sales YTD. New commercial vehicle sales have averaged 383 units per month YTD, which is below the monthly averages of 403 and 446 recorded in the same period during 2021 and 2019 respectively .
“Based on preliminary figures, freight transport by road increased by 4.4% y/y in 2021 and according to the latest GDP figures, the transport sector expanded by 6.3% y/y in 1Q2022. Despite commercial vehicle sales slightly moderating below 2021’s sales levels, we remain optimistic on seeing a continued expansion in the Transport sector for 2022, being one of the sectors that support our 2.5% GDP growth forecast for 2022,” Klein further stated adding that truck companies indicate that inflationary effects are currently driving sales revenues higher, where rising input costs that are passed on to consumers and transport fees based on values of products being transported have increased are two factors leading to higher transport prices charged to consumers.
Research firm Cox Automotive lowered its forecast for vehicle production to 14.4 million units in the US for 2022, citing semiconductor and raw material shortages hampering production. With a tight labour market and strong consumer demand, vehicle prices are likely to continue rising in the US in light of lower supply. Currently, dealers carry about 25 days worth of stock, whereas 70 days was the norm prior to the pandemic.
Elsewhere in the world, Toyota Motor Corp. manufactured 5.3% y/y less vehicles in May 2022, whereas car production decreased by 15% at Honda Motor Co. and marginally rose by 1.7% at Nissan Motor Co. according to Bloomberg Intelligence. Coming closer to home, the floods at the port of Durban would also disrupt the exports of vehicles manufactured in South Africa to other parts of the world.
Globally, aggressive interest rate hikes and fears of recession could weigh on vehicle sales going forward. Global vehicle sales have declined by 12.2% on average each month between January 2022 and April 2022, with average monthly sales down by 16.9% in the US, EU (down 14.8%), UK (up 3.1%) and China (down 2.1%) during the same period . Opposite to the trend we expect in Namibia, some estimates from Bloomberg point to lower vehicle sales growth globally.