Rocky road to recovery

New vehicle sales stuck in first gear
A mixed tank of supply and demand issues is still braking new vehicle sales in Namibia.
Jo-Maré Duddy
Car and truck dealers might strike it lucky and sell more than 10 000 new vehicles this year – a milestone last achieved in 2019 – but the pre-recession heyday of nearly 22 000 annual new vehicle sales remain a distant memory.

According to the latest figures of the National Association of Automobile Manufacturers South Africa (Naamsa), 5 864 new vehicles left showrooms in Namibia in the first seven months of 2022.

This is a mere three percent more than the same period last year, but up around 40% compared to the first seven months of 2020, which marked the start of the Covid-19 pandemic in Namibia. The country’s first Covid year resulted in the worst annual new vehicle sales figure since 2004.

Year-to-date new vehicle sales figures are down nearly 55% from those in 2015, the year before Namibia entered its five-year-long recession.


Government embarked on its fiscal consolidation route in 2016, slashing spending, especially on vehicles.

The slump in public spending set the wheels in motion for an economic crash. Government wages and vacant positions were mostly frozen, a stance which soon spilled over to the private sector. Consumers were already drowning in debt and disposable income shrunk.

The impact of the pandemic completely wrecked the economy. Jobs were lost and salaries were cut, leaving the consumer in the scrap yard.

Business7’s infographic on page 4 illustrates the result: New vehicle sales reversed from nearly 22 000 in 2014 to 7 614 in 2020 and 9 428 last year.


New vehicle sales in July this year totaled a slow 677 units, the poorest number so far in 2022 and dipping below its 6-month moving average, according to Simonis Storm (SS).

It is about 15% less year-on-year (y/y), and a mere 1.7% more than July 2020. In July 2015, a total of 1 933 new vehicles were sold.

According to Cirrus Capital, July’s figures are the lowest figure since October 2020.

“This is the lowest sales figure recorded since Namibia still faced regular Covid 19 lockdowns/restrictions, and is indicative of a struggling consumer,” the analysts said.

On a 12-month cumulative basis, new passenger vehicle sales in July this year were 0.1% lower than in June, decreasing for the first time after rising for 19 consecutive months, IJG Securities said.

In their monthly report in June, IJG said: “New commercial vehicle sales continue to hover around the 4 800 level on a 12-month cumulative basis, where it has been for the past two years now, indicating stagnant demand in this sector. The last time cumulative commercial vehicle sales were at these levels was in 2006.”


In an effort to halt run-away growth in instalment debt at local commercial banks, Namibia’s Credit Agreement Act was amended in August 2016.

The changes required a deposit of 10% on all vehicle loans in the country and 54 months repayment as opposed to zero deposits and 60 months period to repay the loan.

This braked y/y growth in instalment debt virtually overnight.

In June 2015, the year before the recession, y/y growth in individual instalment debt was about 16.7%, followed by 12% a year later. By June 2017, y/y growth had dwindled to 1.55%. By June 2018, y/y growth in instalment debt was negative, a trend which persisted for some three years.

By June 2020, y/y growth stood at -5.75%. Trying to boost sales, the ministry of industrialisation and trade in September 2020 again amended the regulation in terms of the Credit Agreements Act, extending the period to repay a vehicle loan from 54 months to 72 months.

The resuscitation attempt jerked growth in individual instalment debt back to life, albeit it barely. In June 2021, y/y growth was 0.94%. By June this year, it was 1.09%.


By now, however, banks had grown wary of the broken consumer’s ability to repay debt.

Banks’ impairment charges had seen significant growth, especially after the pandemic hit Namibia. According to the latest annual report of the Bank of Namibia (BoN), the non-performing loan (NPL) ratio of the banking industry last year continued to breach the trigger benchmark of 6.0% to stand at 6.4%.

“The unfavourable market conditions that caused cash flow constraints for households and businesses as a result of retrenchments and restrictive business regulations ultimately had a negative influence on non-performing loans, which increased marginally by N$14 million to N$6.7 billion,” the central bank said.

“Anecdotal evidence suggest that commercial banks have already been taking the hawkish stance into consideration, with vehicle finance applications being rejected more frequently,” Cirrus said.

“This is partially because banks are including higher future interest rates into the affordability calculations, and with consumers either not seeing large wage adjustments or concerned about future incomes, both the willingness and ability to finance such loans remains a challenge,” they added.

SS reported the same trend: “Instalment credit extension from commercial banks is another constraint on local vehicle sales as local dealers have alluded to losing numerous deals due to customers not obtaining financing from banks.”


Rising interest rates have also eroded consumers’ ability to meet their debt repayment obligations. The BoN’s repo rate has been hiked by 175 basis points so far this year, with further increases expected.

According to Cirrus: “The SARB’s [South African Reserve Bank] repo rate forecasts suggest that administered interest rates will reach pre-pandemic levels well before GDP [gross domestic product] does, and with a weak consumer still battling higher prices, these higher interest rates will likely lead to some demand destruction.”

In its vehicle sales report in June, SS said the importation of both passenger and commercial vehicles recorded lower annual growth rates in the first six months of 2022 compared to the same half-year in 2021.

“[This was] likely exacerbated by the ongoing war in Ukraine, given that Ukraine is a crucial supplier of various parts used in car manufacturing by numerous European brands - this coupled with a shortage of semiconductors which only started showing signs of improvement since last month [May],”the analysts said.

SS continued: “Given that import levels edged lower in recent months, we expect shortages of both new and quality second-hand cars to remain a constraint on vehicle sales in Namibia.

“Local demand still exceeds supply, despite the interest rate hiking cycle. This implies that vehicle prices are likely to continue on an upward trend (for both new and second-hand cars), raising official inflation rates going forward as the transport category is the third largest in our consumer price basket used to calculate inflation.”

The ministry of trade and industrialisation, in a further effort to try and boost vehicle sales, now allows the importation of vehicles not older than 12 years, which is above the previous 8-year age limit.

“While we commend government for being creative and trying to address market shortages, we would not advise individuals to buy older cars. These cars would likely be at higher risk of having mechanical issues, which could prove more costly to own than a newer car with less mileage,” SS said.


SS summarised major developments in the global vehicle market, saying: “European carmakers registered the lowest number of new vehicle sales during June 2022 since 1996 according to data released by the European Automobile Manufacturers’ Association.

“Vehicle sales decreased by 17% y/y in June 2022, with Volkswagen incurring the largest decline of 24% y/y. While manufacturers such as BMW AG, Volkswagen and Mercedes AG indicated in May 2022 that semiconductor shortages eased, it will take time for this to increase production and supply global dealers with stock.

“Geopolitics could also be driving higher car prices as certain brands relocate their value chains.

“Following the war outbreak in Ukraine, Renault sold its 68% stake in AvtoVaz (a state backed entity in Russia) for one Russian Ruble and Jeep announced in July 2022 to close its plant in China according to Bloomberg Intelligence. Indeed, a potential war between Taiwan and China could see global supplies of semiconductors tumble.

“Globally, car manufacturers are still facing high raw material and energy costs, which contribute to vehicle price increases. Car prices have also increased across the world as carmakers focus their limited production on their most expensive and profitable models.

“In addition, energy shortages and potential energy rationing in Germany are driving concerns of plant shutdowns, worsening stock shortages globally.”


“All the above factors – together with a weak rand exchange rate – risk seeing vehicle prices continue to rise in Namibia, making it more expensive to purchase and operate cars for Namibians,” SS said.

The latest data by the Namibia Statistics Agency (NSA) shows annual inflation for the purchasing of vehicles has been rising since the beginning of the year. The rate in January was 3.9%. In July it stood at 5.2%.

The rate for spare parts and accessories rose from 2.7% to 7.8% in the same period. Inflation for services and repair charges increased from 4.6% to 6.2% in June, before slacking to 4.8% the next month.

Annual inflation for fuel has skyrocketed from 36% in the beginning of the year to 63.1% in July.

Except for fuel, inflation in Namibia is not “particularly high by historical standards”, Cirrus said in its mid-year economic outlook.

However, “the economic devastation since 2016 has left many households and businesses with no reserves. Rising interest rates and food and fuel inflation will further erode the buying power of many,” the analysts added.

SS expects the demand for new vehicles to “start showing signs of a retreat in the vehicle sales data coming out in coming months”.

Cirrus said while there has been some recovery in vehicle sales, the rate of improvement has been slowing “dramatically”.

“This is driven by both demand and supply-side factors. Tangible demand will remain a challenge, as regular price increases from manufacturers and higher interest rates will erode affordability, while commercial banks are increasingly rejecting financing applications.

“Tight supply, with low volumes available due to logistics and other challenges, will also constrain overall sales growth. This is not just adverse for direct vehicle sales, but also after-market transactions like services, repairs, parts, etc.” Cirrus said.


Namibian Sun 2022-12-04

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