The prolonged economic downturn experienced across multiple sectors in South Africa has resulted in markedly depressed sales in the new-car segment over the past 12 months, says finance group WesBank.

Also, as consumers continue to seek more affordable mobility alternatives, a noticeable trend has emerged in favour of pre-owned vehicles across all segments.

WesBank says its business intelligence data for the first half of the year confirms this trend, with applications for used cars outpacing new-car applications by a ratio of over two-to-one.

Marketing and communication head Lebo Gaoaketse says WesBank received 337 061 applications for vehicle finance linked to new cars in the first six months of this year,

“In the same period, however, a staggering 688 316 applications were received for pre-owned cars.

“The main reason for the sizable interest in used cars is their affordability,” he notes.

South Africa’s new-car market is, however, expected to make a comeback, albeit gradually.

“When analysing the performance of the industry, there are clear patterns emerging to indicate that the new-vehicle market is in the trough of the current cycle, which started even before the onset of the Covid-19 pandemic. The worst is behind us,” believes WesBank CEO Ghana Msibi.

“What lies ahead is the start of the road to recovery – not robust growth in the initial phase, but rather shallow gains in certain pockets.”

New-car sales are expected to be boosted by the introduction of more new value-oriented brands from the Far East; the relative stability that has set in since the formation of the Government of National Unity; as well as the significant improvement in the country’s energy availability factor.

“Plans to unlock the full potential of the country’s ports are also expected to assist in countering heightened vehicle price inflation, the prolonged deterioration of the local currency and marginal economic growth,” notes Msibi.

Msibi also expects an interest rate cut in the not-too-distant future.

“Should conditions remain stable or improve, South Africa should expect a repo rate cutting cycle, which will likely come as a series of 25 basis-point cuts, reaching a cumulative 125 basis points drop by the end of 2025.”

Msibi says the impact of the relief in interest rates may not seem big in relation to what consumers pay towards their monthly car instalment. However, the net saving in terms of cumulative household debts, including home loans and credit cards, will be significant, unlocking buying power that will initially benefit used car sales numbers, as well as demo vehicles, and then new cars.

“We don’t expect a significant increase in the size of the local automotive market in the near term,” adds Msibi. “Instead, we expect to see a continued shift in market share in favour of new value-oriented brands. From a WesBank perspective, we have already seen Asian brands growing their share to about 26% of all new-vehicle purchase activity, and we expect that to continue over the coming months.

“Unless there’s a fundamental change somewhere in the economy, whoever prices better, will continue to get the customer’s vote.”