Industry Trend Analysis - Tanzania And Botswana Car Sales To Outperform In SADC - MAY 2017


BMI View : Robust private consumption in Botswana and Tanzania will see growth in passenger car sales in the in the two SADC nations outperform other member states in 2017. Elsewhere we expect South Africa to lag behind and experience a mild recovery in car demand over the year while sales in Angola and Mozambique will continue to decline.

We expect Botswana and Tanzania to be the best performing markets in terms of growth in car sales in the Southern African Development Community (SADC) in 2017, with forecast growth of 8.2% and 23.5% respectively. These two countries will outperform the biggest market in the region, South Africa, which we expect to experience a mild recovery in the year ahead, while car sales in Angola and Mozambique will continue to struggle.

Botswana And Tanzania Leading The Way In 2017
SADC - Passenger Car Sales, Units, % chg y-o-y
e/f = BMI estimate/forecast. Source: National Sources, BMI

Positive Outlook For Consumer s Driving Car Sales

A positive outlook for the consumers in Botswana and Tanzania will be the main driving force behind growth of 8.2% and 23.5% respectively in passenger car sales in 2017 in the two SADC nations. We expect subdued inflationary pressures and a favourable interest rate environment to translate into growth of 3.0% and 5.5% in private consumption in Botswana and Tanzania respectively in 2017 and this expansion in household spending will spill over into growth in the passenger car segment ( see 'Robust Consumer Spending To Support Car Sales Expansion ' , December 14 2016 and ' Positive Consumer Outlook To Continue Driving Car Sales ' , October 7 2016).

Robust Household Spending To Support Growth In Car Sales
Botswana And Tanzania - Private Final Consumption, real growth % y-o-y
e/f = BMI estimate/forecast. Source: National Sources, BMI

South Africa Lagging Behind

We expect growth in car sales in SADC's largest market, South Africa, to emerge from a three-year slump and to experience a mild recovery in 2017. We forecast passenger car sales to grow just 1.0% in 2017, reaching 371,089 units, following a 12.5% drop in 2016. We expect a gradually improving economic picture and an easing of inflationary pressures to offer some relief for South African households in 2017 and to support this return to positive growth in new car sales. That said, we expect high borrowing costs to continue creating headwinds to growth in the South African passenger car segment in the year ahead ( see ' Car Sales To Recover In 2017 But Headwinds Remain ' January 6).

Subdued Recovery In 2017
South Africa - Passenger Car Sales, Units
f = BMI forecast. Source: NAAMSA, BMI

Angola And Mozambique To Continue Struggling

Car sales in Angola and Mozambique will remain under pressure in 2017 as high borrowing costs and elevated inflation combine to create a poor outlook for consumer spending ( see 'Poor Consumer Outlook Will Keep Car Sales Down ' , November 25 2016 and ' High Living Costs Will Keep Vehicle Sales Down ' , October 18 2018). We forecast new car sales in Angola to fall 22.5% in 2017, reaching 7,091 units while first registrations (new and used cars) will decline 11.2% in Mozambique, reaching 32,951 units.

High Borrowing Costs And Elevated Inflation To Drag On Car Sales
SADC - Botswana (LHS) and Angola (RHS) Inflation And Interest Rates
f = BMI forecast. Source: National Sources, BMI

We expect inflation in Angola and Mozambique to remain in double digits in 2017, averaging 35.0% and 22.9% respectively in 2017. Given the persistence of these inflationary pressures, we expect interest rates in both countries to remain high in 2017, ending the year at 16% in Angola and 23.3% in Mozambique ( see ' Slowing Inflation Insufficient To Prompt Cuts In 2017 ' , March 1 and ' High Inflation Will Not Prompt Significant Hikes ' , November 18 2016). These factors will erode consumer purchasing power and lead to a downturn in car sales over the year.