Assessing and Forecasting the Long-Term Impact of the Global Financial Crisis on New Car Sales in South Africa

Abstract

In both developed and developing nations, with South Africa (SA) being one of the latter, the motor vehicle industry is one of the most important sectors. The SA automobile industry was not unaffected by the 2007/2008 global financial crisis (GFC). This study aims to assess the impact of the GFC on new car sales in SA through statistical modeling, an impact that has not previously been investigated or quantified. The data obtained indicate that the optimal model for assessing the aforementioned impact is the SARIMA (0,1,1)(0,0,2)12 model. This model’s suitability was confirmed using Akaike information criterion (AIC) and Bayesian information criterion (BIC), as well as the root mean square error (RMSE) and the mean absolute percentage error (MAPE). An upward trend is projected for new car sales in SA, which has positive implications for SA and its economy. The projections indicate that the new car sales rate has increased and has somewhat recovered, but it has not yet reached the levels expected had the GFC not occurred. This shows that SA’s new car industry has been negatively and severely impacted by the GFC and that the effects of the latter still linger today. The findings of this study will assist new car manufacturing companies in SA to better understand their industry, to prepare for future negative shocks, to formulate potential policies for stocking inventories, and to optimize marketing and production levels. Indeed, the information presented in this study provides talking points that should be considered in future government relief packages.

Keywords

• SA new car sales
• Box–Jenkins methodology
• global financial crisis (GFC)
• forecasting
• SARIMA