Spark in new vehicle sales

Jo-Maré Duddy – The slight uptick in new vehicle sales in January could be an indication of a better year for the local motor trade.

A total of 694 new vehicles left showrooms in Namibia last month, up 3.4% or 23 units from January 2020.

This is the first positive growth posted since September last year and only the third positive annual growth figure witnessed in the past 12 months, Cirrus Securities commented yesterday.

“Vehicle sales are expected to rebound in 2021, largely due to base effects as business operations are not expected to be halted abruptly,” Cirrus said.

According to the analysts, vehicle sales growth will be fuelled further by the “release of pent-up demand” created last year.

Simonis Storm (SS) is optimistic about 2021 too.

“With the total sales having increased at an average of 16.5% month-on-month for the month of February since 2015, expectations are slightly optimistic for February 2021, against all odds. Furthermore, January has historically recorded low vehicle sales over the years. Against this backdrop, 2021 will perhaps help stabilise the downward spiral experienced over the last five years,” SS said.

BUDGET BOOST

The Namibia Statistics Agency (NSA) will be conducting the population census this year and Cirrus expects that will also boost new vehicle sales. “It is expected that government will play a bigger role in vehicle purchases this year,” they said.

Former finance minister Calle Schlettwein slammed the brakes on vehicle spending when he took office in 2015.

Whereas the budget for vehicles exceeded more than N$1 billion in 2014/15, it has stalled in subsequent fiscal years: actual spending in 2016/17 amounted to N$91.9 million, followed by N$22.2 million in 2017/18 and N$2.8 million in 2018/19.

Estimating spending in 2019/20 was N$5.1 million, while the estimated budget for 2020/21 was N$450 000. Current finance minister Iipumbu Shiimi didn’t project spending on vehicles in coming fiscal years when he tabled the 2020/21 budget last year.

FIGURES

A total of 335 passenger vehicles were sold last month, up 7.6% from December 2020 and 22% more than in January 2020. The annual growth rate is the highest since May 2019, Cirrus said.

SS attributed the increase to car rental agencies, which acquired 65 units last month compared to none in January 2020. If rental agencies are factored out, new passenger vehicle sales declined by 0.7% on an annual basis, the analysts said.

“In early 2020 rental agencies diversified their customer base by offering monthly rental packages to individuals which was a cheaper option of getting around while keeping ownership risk minimal,” SS said, adding that this move probably started paying off.

New commercial vehicle sales totalled 339, 8.4% lower month-on-month and a drop of 10.8% year-on-year. Excluding 2020 sales, this is the second lowest number of new commercial vehicles sold since January 2006, Cirrus said.

“This is a clear indication that the recovery witnessed in commercial vehicles will take several years to return to normalised levels,” the analysts added.

SS said the figures suggest that business confidence remains “sluggish”.

Light commercial vehicle (LCV) sales saw decreases both on a monthly and annual basis, with growth of -4.4% and -6.0%, respectively.

A total of nine medium commercial vehicles were sold in January, representing a growth rate of -35.7%. Nine heavy commercial vehicles, 19 extra heavy vehicles and one bus were sold last month.

OUTLOOK

Despite the improvement in January sales, total new vehicles sold last month – 2020’s figures excluded – still represent the second lowest since May 2009, Cirrus said.

Notwithstanding the “expected artificial spur” for new vehicle sales, the analysts forecast that business will remain subdued this year “as the economy struggles to rebound”.

“This is because many households remain at risk of retrenchments, are constrained by high debt levels (relative to disposable income) and face greater difficulty accessing finance given the riskier macro environment,” Cirrus said.