A total of 1,066 vehicles were sold in December, a 19.1% m/m drop from the 1,317 vehicles sold in November, and 32.7% lower than December 2015 when 1,583 vehicles were sold. For the calendar year of 2016, 16,598 new vehicles were sold, down 21.9% from the 21,246 vehicles sold over the previous calendar year. Vehicle sales have been lower than both 2015 and 2014, but still slightly ahead of 2013 levels.
Vehicle sales have been contracting on a year on year basis since mid-2015. The slowdown has been felt in both passenger and commercial vehicles, with passenger vehicle sales down 28.3% y/y and commercial vehicle sales down 35.4%. Within the commercial vehicle segments the light commercial category, which makes up the bulk of sales, has decreased by 32.2% y/y, while medium commercial vehicles sales have decreased by 28% y/y and heavy commercial vehicle sales have decreased by 76.4% y/y.
Passenger vehicle sales decreased by 17.8% m/m to 440 vehicles in December, while commercial vehicles sales decreased by 19.9% m/m to 626. This brings the total number of passenger and commercial vehicles sold in 2016 to 7,006 and 9,592 respectively. Of the 9,592 commercial automobiles sold, 8,838 were classified as light, 277 as medium and 477 as heavy commercial.
In 2016 Toyota and Volkswagen dominated the passenger vehicle market based on the number of new vehicles sold. Toyota and Volkswagen claimed 29% and 28% of the market respectively. They were followed by Ford at 7% and Mercedes at 5%. The rest of the passenger vehicle market remains very fragmented.
Toyota also remains the leader in light commercial vehicle sales with 48% of the market, followed by Nissan at 16%. Ford and Isuzu each claimed 11% of the number of light commercial vehicles sold in 2016. In the heavy category, Scania is the largest seller, commanding 43% of the market share.
The Bottom Line
Throughout the period of 2014 all the way to mid-2015, we saw robust growth in vehicle sales, which was driven by a strong consumer base supported by expansionary fiscal and monetary policy and real wage growth. However, 2016 was not a particularly good year for new vehicles as December numbers brought the year to a disappointing close. The slowdown was driven by two main factors. Firstly, the reduction in government spending had a direct and indirect effect on the demand for new vehicles. Both direct orders from government and the weaker economic environment have reduced the demand for capital goods. Secondly, higher interest rates and amendments to the Credit Agreement Act (which requires a deposit of 10% on all vehicle loans and limits repayment periods to 54 months) have reduced the availability of credit used to purchase these capital goods.
We expect the slowdown to continue into 2017. The full effect of interest rate increases normally takes 18 to 24 months to filter through to all areas of the economy. Additionally, lower government spending on capital expenditure should also put pressure on vehicle sales for the foreseeable future.