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Decline in Sales of New South African Vehicles
Jun 26, 2008

The data from National Association of Automobile Manufactures of South Africa reveals that a decline of about 2.8% was registered in sales of new vehicles in South Africa during April 2008.

According to the data released by NAAMSA (National Association of Automobile Manufacturers of South Africa) on May 13, 2008, the sales of new vehicles in South Africa dropped by about 2.8% during April 2008 from the same period previous year, as per the reports published by
bloomberg.

The NAAMSA data shows that sales of new vehicles declined to about 42,359 in April 2008 as compared to 43,563 in April 2007. Moreover, the sales of about 24,094 new cars is nearly 7% or 1,819 units less in comparison to 25,913 units sold during April last year. Also, the sales of 14,852 new minibuses and Light Commercial Vehicles (LCVs) in April 2008 showed a drop of nearly 0.8% or 116 units in comparison to sales of 14,968 units in April 2007.

The rise in interest rate of vehicle loans is identified as one of the major causes for decline in demand for new vehicles in last few months as most of the vehicles are financed by banks. Also, high rate of interest discouraged a large number of people from purchasing new vehicles as they were not interested in paying monthly installments for new vehicle.

Moreover, the rise in prices of fuel, food and other necessities is also considered as a significant reason behind the decline in number of customers and confidence on vehicle market during April 2008.

Furthermore, due to slowdown in the levels of economic activities, increase in household debt, tight financial conditions and rise in inflationary pressures, the growth rate of new car and LCV segments is expected to be low, as forecasted by NAAMSA.

“Thus, to raise the demand for new vehicles and number of customers, the South African auto industry should introduce various profitable schemes, such as low prices, easy installments and finance facility to its customers as it is not easy for them to purchase new vehicles in present scenario with high interest rates on vehicle loans, slowdown in the economy and high inflation”, says a
RNCOS research analyst.

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