WesBank forecasts that South Africa’s new vehicle sales will decline by 12% this year. Compared with 2015’s industry total sales of 617 691 vehicles, the bank expects that this year’s figure will be 543 306 units.

Speaking at the 2016 SAGMJ/WesBank Car of the Year presentation function, the bank’s CEO, Chris de Kock, cited macroeconomic headwinds as reasons for the anticipated decline. He said the forecast was based on a low GDP growth rate, changes to the interest rate, inflation, a downgrade of South Africa’s credit rating and deterioration of the rand’s exchange rate.

De Kock said over the next three years the interest rate was likely to be hiked by 125 basis points while the country’s sovereign credit rating would be downgraded to non-investment grade or junk status. Additionally, the value rand would continue to fall against the US dollar, dropping to R17,20 by the end of 2019.

“The movement of the rand will be key for new vehicle sales performance in South Africa. A deteriorating currency will force manufacturers to increase prices more aggressively. This will push new vehicle price inflation well outside that of headline CPI, thus sending more buyers to the used car market,” he said.

De Kock added that interest rates would also play an important role in affordability and the demand for credit, as had historically been the case. He predicted that, in the first half of 2016, industry sales would be down by 10% year-on-year, with passenger car and light commercial vehicle sales declining by 10% and the remainder of the commercial vehicle segment falling by 12%.

The second half of 2016 would be tougher, mainly as a result of accelerated price increases for new cars as well as higher interest rates. Passenger car sales would be likely to decline by 15,5% year-on-year, with LCV sales down by 10% for the same period. Sales of larger commercial vehicles were expected to slide by 14,4% year-on-year as businesses opted to not to replace existing models.

Combined, the full year would see passenger car sales down by 12% and those of LCVs by 10%, while the number of medium and heavy commercial vehicles sold would be down by 13,3%.