Determinants of Vehicle Sales in South Africa: Evidence from Macroeconomic and Market Dynamics

Vehicle sales constitute an important component of household consumption and a key transmission channel of macro-financial conditions in South Africa. This study investigates the macroeconomic determinants of vehicle sales by examining the roles of economic activity, interest rates, and inflation over the period 2000Q1 to 2025Q4. Using quarterly data, the analysis employs the autoregressive distributed lag (ARDL) bounds testing approach to estimate both long-run and short-run relationships, complemented by an error correction model and Granger causality analysis. The results confirm the existence of a stable long-run cointegrating relationship among the variables. In the long run, vehicle sales respond positively to economic growth, while inflation and interest rates are associated with reduced demand. Short-run dynamics indicate that vehicle sales respond positively to economic growth, and negatively to interest rates and inflation, reflecting affordability and credit constraints, alongside rapid adjustment to macroeconomic shocks. The Granger causality results suggest that vehicle demand is largely driven by macro-financial conditions rather than exerting feedback effects on them. Overall, the findings highlight the sensitivity of South Africa’s automotive sector to macroeconomic stability and underscore the importance of prudent monetary policy and price stability in sustaining durable goods demand.