South Africa's automotive industry is poised for a potential rebound in the new vehicle market in 2025, driven by stabilising inflation, anticipated interest rate reductions, and relieving energy constraints.

This optimism comes on the heels of a challenging 2024, which saw total aggregate new vehicle sales decline by 3% to 515 712 units, marking the lowest annual figure since the impact of the COVID-19 pandemic.

The latest figures released by the Automotive Business Council (Naamsa) today revealed a stark contrast between 2023 and 2024, where the vehicle sales dropped from 531 775 units to 515 712 units.

However, the latter part of 2024 showed glimmers of recovery, with December marking the third consecutive month of year-on-year sales increase.

The industry recorded an uptick of 2.5% in new vehicle sales for December, with 41 273 units sold compared to 40 262 in the same month the previous year.

Despite these positive signs, Naamsa noted that the new vehicle market remains closely tied to broader economic conditions and has not yet rebounded to pre-pandemic levels.

Four years post-COVID, the market is still lagging just 0.9% below the 2019 benchmark of 536 612 units. The industry’s outlook at the start of 2024 hinted at a challenging first half, followed by a more optimistic second half; unfortunately, this scenario did not materialise as anticipated.

Throughout 2024, sales continued to face strain due to shifting market dynamics, particularly with an influx of new entrants, particularly from Chinese brands, which offered more affordable options.

However, Naamsa CEO Mike Mabasa said the last quarter’s positive economic indicators and resilience in the volume passenger car segment could signal better days ahead in 2025.

Mabasa highlighted that the South African Reserve Bank’s interest rate cuts toward the end of the year, along with easing inflation, created a more favourable environment for consumer spending.

“Further interest rate cuts in 2025 would support vehicle affordability across all the various segments,” he said.

“The South African Reserve Bank stated that risks to the country’s growth outlook are assessed to be balanced, but that growth could be higher from 2025 onwards, given ongoing reforms, especially in the network sectors, such as electricity and transport. With an improved GDP growth rate of around 1.5% projected for 2025, the new vehicle market would likely improve by single digits compared to the level of 2024.”

The automotive industry contributes 5.3% to GDP—3.2% from manufacturing and 2.1% from retail—with vehicle exports alone having reached a record R270.8 billion in 2023.

For the first time since the COVID-19 affected 2020, vehicle exports declined to 308 830 units in 2024, down by a substantial 22.8% compared to the record performance of 2023 when the industry exported 399 594 units.

Various factors impacted the plummeting in vehicle exports, including a slowdown in demand in the EU, the domestic automotive industry’s key export region, due to low economic growth, stricter emission rules, and competition from cheaper electric vehicle imports from China in the region, as well as the timing effect of new model introductions in the domestic market by a major exporting OEMs

Brandon Cohen, chairperson of the National Automobile Dealers’ Association (NADA), termed the state of the industry as disappointing but noted the momentum from the last quarter, thus expressing cautious optimism for 2025.

“The coming year will be intriguing, with local industry wage negotiations and changes in the US administration adding to the complexities. Managing consumer demand amid rising cost pressures remains challenging for our retail dealers,” Cohen said.

“Consumers are increasingly opting for smaller, more affordable vehicles or high-quality pre-owned models to navigate economic constraints, placing pressure on retailers’ bottom lines.”

BUSINESS REPORT