Statistics released today from The National Association of Automobile Manufacturers of South Africa (NAAMSA) showed that new vehicle sales in South Africa fell by 23.4% in May compared to the same month last year. This is a drop of 12 095 units to 39 533 units being sold in May this year. There are several factors which caused this huge decline, such as; the public holidays at the beginning of the month that meant there were fewer working days in the month and the disruptions caused to business by the xenophobia attacks.

All in all, these two factors were not the main drivers behind the falling sales figures. The underlining factor is that, consumers in South Africa are not able to purchase new cars anymore like they used to due to the harsh economic conditions prevailing in the country. With ever rising interest rates, very few can think about purchasing a new car right now. Most new cars now have bigger and faster engines and that means they will most likely consume more fuel. Now with the fuel prices set to go up, why would one then buy a new car and increase their monthly expenses?

The new vehicle sales industry is going through a tough patch right now and unfortunately there is no light at the end of the tunnel coming anytime soon. The majority of South Africans are already in serious debt with many having their cars and other assets being reposed due to the failure of them repaying their debts. What would be interesting is to find out how many cars repossessions are taking place on a monthly basis and compare that to the new vehicle sales.

But isn’t this what the Central Bank wanted? To increase interest rates so that people stop spending? Based on the fact that people have stopped purchasing new cars, maybe the Central Banks high interest rate policy is starting to work? But at what cost to the consumer?

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