NEW vehicle sales surged 20,7% year on year last month, outstripping an expectation for moderate growth in the sector, the National Association of Automobile Manufacturers of SA (Naamsa) said on Friday. Econometrix economist Tony Twine said the improvement in new car sales indicated an overall strengthening of the economy in the aftermath of the economic crisis. “Furthermore, sales were greatly assisted by lower interest rates this year and pent-up replacement demand,” he said. Naamsa, which represents South African vehicle manufacturers, cautioned, however, that the improvement should be viewed in the light of very depressed sales this time last year.

Nevertheless, last month , aggregate industry sales remained 23,9% ahead of the corresponding six months last year . Naamsa said aggregate new passenger car sales surged 25,8% year on year last month to 26810 vehicles 21309 in the corresponding period last year . “The new car market has continued to perform well, with the selling rate of new cars per day remaining relatively robust,” Mr Twine said. Toyota led the way with vehicle sales in SA, selling 8224 vehicles last month and exporting a further 4209 to Africa and Europe.

“New vehicle sales in June paint a positive picture for the South African vehicle market,” said Andrew Kirby, Toyota’s vice-president of sales and marketing. “With the country’s attention focused on the World Cup there was an expectation that sales could slow during this period. We are, however, heartened by the state of the market and the upward trend of the first half of this year.” Volkswagen and General Motors SA were the next highest sellers of vehicles last month . However, economist Kevin Lings of Stanlib said it needed to be recognised that the motor industry was the most volatile manufacturing industry in SA measured over any significant period. “Hence this extreme gyration in sales should be expected. In both 2004 and 2005 sales of passenger car sales rose by more than 20% (in volume terms), but then declined for three consecutive years.”

But Mr Lings was optimistic passenger and light commercial vehicle sales had moved past their worst, helped partially by the build-up for the World Cup, 30-year-low interest rates and rising household incomes. “Hopefully the combination of sustained low interest rates and slightly easier bank lending conditions will systematically lead to continued strong sales in the months ahead.” This sentiment was echoed by Nedbank economists, who said consumer confidence should improve further this year, helped by lower interest rates and income growth. “This, together with easier credit criteria, should support car sales during the remainder of the year. “However, high existing household debt levels and slow employment growth will contain the growth rate.” Ultimately, Mr Twine said that higher vehicle sales would depend on greater export volumes. “The motor industry must follow the slogan, export or die,” he said.