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In today's blog we take a detailed look at South Africa's motor trade sales. This includes the sales of new and used vehicles, income earned from workshops, sales of car accessories as well as sales at petrol forecourt stores, which in recent years have become the target for supermarket chains to offset some of their goods there. Think BP and Pick 'n Pay, or Engen and Woolworths Foods etc.
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The nominal and real numbers
Firstly we will take a look at the nominal numbers (inflation included in the reported numbers), and then we will strip out the effects of inflation in order to determine the real underlying trend and growth in the motor trade data reported, as inflation often exaggerates growth rates and makes the numbers look a lot stronger than it actually is. Once inflation is stripped out of the numbers, the underlying growth is revealed.
Nominal
As can be seen from the bar chart above the average monthly sales of most sales categories has increased every year. And a large part of that is not increased demand, but rather price increases that inflated the sales values. The bar chart below shows the same data as the above bar chart but with inflation stripped out of the numbers.
Real
As mentioned earlier inflation is stripped out of the numbers in order to determine the underlying growth/trend in the data without the influence of price movements. And as can be seen from the graphic the average monthly sales (expressed in 2007 prices) have not grown by much, when inflation is taken out of the numbers. This clearly shows the effect inflation has on the reported unadjusted numbers. But the underlying trend shows the sector has been rather slow in gaining any momentum over the last 10 years.
The pie chart below takes a look at the share of the various categories to total income of the motor trade industry in 2017 so far.
The pie chart below takes a look at the share of the various categories to total income of the motor trade industry in 2017 so far.
No real surprise that the bulk of the contribution goes towards new vehicles, but what is rather surprising is the fact that almost the same amount of money spent on new cars each month in South Africa, is spent in fuel purchases. Currently South Africans spend roughly R8billion a month on fuel for their vehicles. And while convenient stores only contributes 3.3% to total motor trade income, it still amounts to a not so insignificant R1billion a month.
The picture below shows a typical convenient store location at a petrol station forecourt where South Africans spends roughly R1billion a month buying various fast moving consumer goods (FMCG).
Engen petrol station with a Woolworths shop in the forecourt
The table below provides a summary of the growth in average income per month per year (in real prices) for the various categories from 2007 to 2017 so far. And its clear that while certain areas excelled others have been struggling.
Category |
Growth from 2010 to 2017 (in %) |
Accessories |
37.5 |
Convenient stores |
-28.2 |
Fuel |
6.7 |
New vehicles |
-17.3 |
Used vehicles |
2.9 |
Workshop income |
-7.6 |
Total |
-0.1 |
The table above shows that when inflation has been stripped out of the numbers the average income earned per month by the motor trade industry has actually declined from the levels it has seen in 2007. Clearly showing the stress the industry is under. Most noticeable is the fact that new vehicle sales income has declined by almost 18% over the period, while used vehicle income has actually increased. Showing how struggling consumers are moving towards rather buying a used vehicle instead of a new vehicle.
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