đź’Ą Loose Canon đź’Ą

ICYMI The imminent accidentđź””: What car sales are telling us about the SA economy

Tim Cohen 6 min read
ICYMI The imminent accidentđź””: What car sales are telling us about the SA economy
Art by Dall-e: Prompt by T Cohen

There is a joke that new Teslas don't come with a new car smell. They come with an Elon musk. Perhaps that is more true now than ever. 

The smell of car sales does tell us other things too, of course, particularly about the state of the economy, and it has to be said, that it's not coming up smelling of roses. But of course it's both complicated and very simple, as most things are. 

Start with the very simple: the general correlation between GDP growth and car sales is positive around the world. The reason is obvious: cars are a significant investment for most households, so increases are generally tied to consumer spending, confidence about economic growth, and increases in disposable income. There is a knock-on effect too since because the automotive industry is such a large contributor to GDP, a rise in cars sales tends to amplify underlying GDP growth. 

Of course, it's not as simple as that because interest rates, fuel prices, and government policies can also make a difference. But the underlying reason why the correlation between GDP growth and car sales is so strong, I suspect, is simply because cars are just easier to count. The fact that the absolute numbers are pretty easy to collect, and are broadly reliable, is a great plus for any analysis. Because we can do this now in seconds, I asked ChatGPT for a whole bunch of numbers about new passenger car sales over the past decade, and this is some of what I found. 

1: Chinese car sales just knock the socks off all other countries. 

If you read what we might call the Western English language press, you might be under the impression that the Chinese economy is under terrible pressure, which of course it is. But that’s mostly relatively speaking because in absolute numbers, car sales in China are just mammoth. 

Just to take the 2023 number for example, those 26 million cars are eight times more than the number of cars sold in the US, and about the same proportion of cars sold in all the countries in South America. Clearly, reports of the death of the Chinese economy are greatly exaggerated. It's also interesting that if you look at it over the full decade, there is (still) an upward trajectory. 

To me, this says so much about geopolitics generally. For years now, the growth of European and Japanese car makers has been enormously boosted by the growth of the Chinese market. But its so huge now, domestic car makers are gradually eating into that growth. Combine that with the huge change over, particularly in China, to electric cars, which has allowed local car makers to negate at least somewhat the historical technological advantages the Western car makers had built up over time, you have a real revolution on your hands. 

2: US car sales are declining at a rapid rate, despite GDP growth holding up strongly. 

To me, this tells a political story. Why did American voters vote for a candidate who promises huge tariff protection against foreign manufacturers? You can see it here. The US car market is on a downward trend, and it is not huge to begin with, compared to the enormous might of the US economy as a whole. The issue of course is that the US market is very mature and pretty saturated. But still, if you are a factory worker at a US car maker, your job is seriously not secure. The numbers tell the story. 

3: India’s car market is getting pretty big, and rising strongly. South America is in decline.

It's amazing how car sales in South America and those in India have just swapped places. South America was supposed to be the next locale of global growth after Asia. But its going the opposite direction. 

4)  What about Africa and South Africa?

It will surprise few South Africans to know that car sales in SA have been under pressure for years now, but did you know that the same trend is visible across the continent. About half the cars sold across the continent are sold in SA, so it make a big difference to the continent if SA’s market is in recession. If you pull SA’s decline out, then the best you can say is that the continent’s cars sales are holding, but holding at a low level. 

6) Looking closer at the relationship between GDP growth and car sales. 

 It's interesting that even though car sales in SA are generally declining if you look at it over the decade, this has happened in a context of at least a little bit of GDP growth. Obviously, it takes more than a small amount of economic growth to stimulate car sales. And that makes sense, since you would expect the more immediate demands of household expenditure to take priority. 

It's worth noting that the way it looks now, 2024 will come in a bit lower for the South African industry as a whole, which is worrying. But not as worrying as the fact that exports are really just falling off a cliff. The industry recorded exports sales at 23,342 units in October 2024, which was a decrease of 17,324 vehicles, or a loss of 42,6%, compared to the high-based 40,666 vehicles exported in October 2023. For the first 10 months of the year, vehicle exports are now 23,1% below the corresponding period 2023.

SA’s problem is that its export markets, the continent and Europe are now in low growth mode, and SA’s representation in the new sector, electric vehicles, is non-existent. Lots of people have been waving their arms and shouting about this to government, which claims its reacting, but like so much else, too slowly and with too little vigour. 

Turns out, it's not only Tesla’s that are musky. 


From the department of deliberately messing with the algo

The Wall Street Journal is reporting that, as a joke, London's anti-tourist set has been falsely claiming as a ruse that the food at restaurant chain called Angus Steakhouse (where no Londoner would be seen dead) is fabulous.

One reviewer said on Reddit: “Angus Steakhouse is on my wish list for the last meal I ever have. I just hope the tourists don’t find out about it.”

Someone on Tripadvisor, said “It was Taylor Swift and Freddy Mercury’s favourite eating spot—never mind the King,” The restaurant replied that this was “a tad embellished.” And hilariously, one fake reviewer said. “I’ve been a vegetarian for over 15 years, but not even I can resist Angus Steakhouse’s steak sandwiches”. 

The restaurant is, well, thrilled. Business is booming.


From the department of global calamities


Share
Comments

Join the conversation

đź’Ą Loose Canon đź’Ą

I'm a South African journalist - former FM, Business Day & Business Maverick editor. I currently contribute to Daily Maverick and Currencynews.co.za. Commentary and reflections on business, economics.

Great! You’ve successfully signed up.

Welcome back! You've successfully signed in.

You've successfully subscribed to đź’Ą Loose Canon đź’Ą.

Success! Check your email for magic link to sign-in.

Success! Your billing info has been updated.

Your billing was not updated.