By Hilary Mare
THE National Association of Automobile Manufacturers of South Africa (NAAMSA) last week released Namibia’s new vehicle sales statistics for the month of August confirming that new vehicle sales contracted by 12.8 percent m-o-m compared to 1.2 percent contraction recorded in the prior month.
On an annual basis, total vehicle sales contracted by 14.1 percent y-o-y compared to -6.0 percent registered in the prior year.
“The monthly contraction in vehicle sales can be ascribed to a decline in all vehicle categories with an exception of medium commercial vehicles (107.1 percent m-o-m). In addition to the slowing Namibian economy, vehicle sales units have also been partially affected by the decreasing vehicles sales in South Africa,” Indileni Nanghonga, a trainee economist at Simonis Storm Securities explained.
The slowdown in the number of vehicles sales is likely to affect profits of motor vehicle dealerships and particularly Bidvest Namibia (BVN), through its subsidiary Novel Motor Company and Nictus Holdings (NHL), through its Auas Motors dealership.
“As highlighted in the full year BVN report by Simonis Storm, management has however given guidance that they do not expect the earnings from the division (Novel Motor) to grow going into FY17 due to the slowing vehicles sales trend being experienced in Namibia, as well as the new credit legislations that are coming into play.160 units of the vehicle brands which are retailed by Auas Motors (Isuzu, Opel and Chevrolet (Chevy)) were sold in the month of August 2016,” added Nanghonga.
Essentially, the decline in new vehicle sales can be attributed to a contraction in passenger vehicle sales which contracted by 17.8 percent m-o-m to 537 units in August 2016. Light commercial vehicles continued on a downward trend for two consecutive months and have contracted by 9.6 percent m-o-m to 761 units in August 2016.
Furthermore, heavy commercial vehicles, extra heavy vehicles and buses also declined by 25.0 percent, 29.1 percent and 100.0 percent, respectively in august 2016 to 3 units, 39 units and 0 units, respectively. Medium commercial vehicles surprised to the upside, growing by 107.1 percent m-o-m to 29 units in august 2016. On an annual basis, total new vehicle sales contracted by 14.1 percent as a result of an annual decline across all categories. In South Africa motor trade sales decreased by 1.6 percent y-o-y in July 2016. The largest negative annual growth rate was recorded for new vehicle sales (-10.4 percent) in July 2016.
The suggested aggregate value of new vehicle sales stood at N$5.6 billion during August 2016 compared to N$6.1billion recorded in the prior month. The value of new vehicle sales during the month under review contracted by 8.3 percent m-o-m and 0.1 percent y-o-y to N$5.6 billion compared to N$5.7 billion in the prior year. We are of the view that the stronger rand (see figure 6) coupled with lower volumes sold in the heavy and extra heavy commercials has attributed to the decline in the suggested value of new vehicle sales.
The Namibia economy remains sensitive to economic movements in South Africa and the global economies. Instalment credit, which is mainly used for the purchases of movable assets such as vehicles, has been under pressure despite the slight increases during July 2016. Instalment credit grew by 8.5 percent y-o-y in July 2016 compared to 16.2 percent y-o-y in the July 2015.
The slowing instalment credit could exert further pressure on the number of new vehicles sold. Annual growth in new vehicles sales in August’s has slowed down with August 2016 growing the slowest by -14.1 percent y-o-y. This trend is also evident in other months and we expect vehicle sales to remain under pressure going forward.
Crude oil gained momentum by 25.0 percent to $46.5/bll since January 4 2016 to September 15, but still remains at low levels compared the level of over $100/ bll in 2014. Thus, the Ministry of Mines and Energy reduced fuel prices for September 2016. The 95 octane unleaded petrol decreased by 46c/l, while all diesel grades decreased by 34c/l. This will give some respite to dealerships.
Confidente. Lifting the Lid. Copyright © 2015