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Johannesburg - When the vehicle market turns around, the highest growth will be seen in sales in the entry-level market.
The reason for this is that during the recession this market experienced the biggest sales decline, while sales of luxury vehicles remained stable.
The fact that between 25% and 30% of all vehicle sales are now for cash explains why the luxury market is doing better than the entry-level market, says Absa Vehicle and Asset Finance managing executive Marcel de Klerk.
The premium sector is currently driving the market, he explains.
From a look at Absa's loans it is clear that loans to people earning R20 000 and less have weakened in line with the market.
In contrast, capital extension to people above this income level has remained stable.
De Klerk says 25% of all sales take place in the segment of the market earning less than R20 000. These individuals also buy traditional models that cost between R80 000 and R130 000.
There is therefore potential for growth in this segment when the market recovers, but De Klerk does not expect these consumers to return to the market before 2011. Motor manufacturers are however preparing for the upturn.
Xavier Gobille, managing director of Renault SA, last week announced that this was the reason the group would be focusing on the entry-level market.
Gobille substantiated his point with a graph that clearly indicated that sales in the past couple of months had significantly been in the entry-level model sector.
In contrast, the premium or luxury segments had emerged basically unscathed from the recession and in certain areas there had even been growth.
Gobille says as soon as the ordinary consumer is able to return to the market competition in the cheapest segments will be stiff.
The Renault Sandero is being positioned to compete in this market.
According to the National Association of Automobile Manufacturers, the latest sales figures show that in February only 250 Volkswagen Citi Golfs were sold.
This entry-level model ceased production last year, and Volkswagen is to announce its replacement in the coming week.
However, this replacement vehicle will be more expensive than its predecessor.
Another example of a popular car in the South African market that has been replaced by a much more expensive model is the Toyota Tazz.
Toyota's substitute, the Yaris, is also popular, but not nearly as affordable.
But things are going swimmingly for certain luxury vehicle brands.
For example, in February 48 units were sold by Porsche and 571 left the Jaguar/Land Rover stable.
- Sake24.com
For more business news in Afrikaans, go to Sake24.com.
