South Africa’s automotive market built momentum this year, supported by a favourable interest rate environment, record-low new-vehicle inflation and liquidity from the two-pot pension reform, but the outlook remains fragile, with affordability constraints and export headwinds threatening longer-term growth, says credit data bureau TransUnion.

Passenger car sales broke through the 35 000-unit ceiling for the first time in years, with July and August having marked the strongest volumes since 2014.

According to industry organisation naamsa | The Automotive Business Council, new passenger car sales grew 22.5% year-on-year in the second quarter of the year, fuelled by lower borrowing costs, aggressive original equipment manufacturer (OEM) incentives and the entry of new value-focused brands.

Chinese automakers continued their rapid growth, expanding market share to nearly 15% in the second quarter, up from 3.1% in 2022. Their affordable, technology-rich sports utility vehicles and expanding dealer networks are reshaping competition and forcing legacy OEMs to rethink pricing, features and model cycles.

Automotive manufacturer Toyota retained overall leadership, with automotive manufacturer Suzuki securing second place for the second consecutive quarter, the TransUnion ‘South Africa Mobility Insights’ report shows.

However, while domestic momentum improves, passenger vehicle exports fell by 24.6% in the second quarter owing to softer global demand and new US tariffs of up to 30%.

Premium models, which are heavily reliant on the US and European markets, are under pressure, and this is raising concerns for production, jobs and investment.

Meanwhile, South Africa's National Administration Traffic Information System data shows new registrations rising by 20% year-on-year in the second quarter, led by the Northern Cape, Free State and North West provinces.

In contrast, used vehicle registrations declined by 1.4%, reflecting pressure in that segment, the report shows.

Across all vehicle sales, the used to new vehicle registration ratio rose to 3.2 in the second quarter, up from 2.5 in the first quarter of the year, indicating a quarter-on-quarter increase in the relative share of used vehicle registrations, the report shows.

However, this remains below the 3.8 ratio seen through much of 2024, which suggests that new vehicles have regained some ground year-on-year.

While used vehicles continue to dominate overall registrations, the market has shifted slightly back toward new vehicles compared with last year. This nuanced divergence presents opportunities for OEMs and dealer networks, while independent used dealers continue to face headwinds, it notes.

Meanwhile, improved affordability, aggressive incentives and growing demand for value brands, alongside modest support from two-pot withdrawals, helped sustain momentum this year, TransUnion says.

However, as interest rates remain elevated, credit conditions tighten and the two-pot effect normalises, growth is expected to moderate in 2026, with export risks and rand volatility adding uncertainty, the report says.

The South African Reserve Bank has also cut interest rates five times since September 2024 and inflation has returned to the lower end of the 3% to 6% band, which has provided households with some relief.

Consumer confidence has improved among middle- and higher-income groups, although low-income consumers continue to face pressure from food and electricity costs.

These macro shifts provide short-term support to the vehicle market, but momentum is likely to taper in 2026 without further reforms, TransUnion says.

Looking ahead, TransUnion advises OEMs, dealers and lenders to recalibrate strategies to balance domestic opportunities with external risks.

Industry participants should align campaigns with liquidity cycles, planning promotions and stock availability around expected two-pot withdrawal windows, it recommends.

“Affordability must remain the priority, with a sharpened focus on value brands, certified pre-owned vehicles, and models that deliver a strong total cost of ownership.

“Financing solutions should also evolve, and should offer deposit support, trade-in boosters, and more flexible terms, while carefully monitoring repayment behaviour to manage post-purchase risk.”

Simultaneously, leveraging data-driven insights, integrating credit and registration analytics to identify liquidity-sensitive buyers, preapprove customers, and track repayment performance, will be critical for sustaining growth in an uncertain environment, the credit bureau says.