'Big car price cuts needed'

Johannesburg - Local dealers are currently selling an average of 20 new vehicles per dealership each month, and total sales of new vehicles for the year will be even below earlier predictions of 400 000.

The debate in which some experts reckon it's time for aggressive price reductions is hotting up, although some consider this unrealistic.

David Powels, president of the National Association of Automobile Manufacturers (Naamsa), says total new vehicle sales for the year will probably not exceed 380 000.

Naamsa this week decided to revise its figure of more than 400 000 after January and February sales figures were considerably lower than expected. The sector for light commercial vehicles had been particularly hard hit.

The many price increases on the horizon will negate the positive impact of potential rate cuts.

WesBank chief executive Brian Riley also predicts vehicle sales of 385 000 units.

This is a 28% drop from last year's 533 000.

Powels says sales in March, traditionally the best month of the year, have shown no improvement thus far.

Monthly sales are currently averaging at 20 vehicles a month, reports Brand Pretorius, chairperson of McCarthy Motor Holdings.

Leases could run to R250 000 to R1m a month, while overheads are R3.5m a month. He says dealers in a metropolitan area need to sell 60 to 75 vehicles a month to cover fixed costs.

Future strategist Clem Sunter comments that manufacturers must cut prices to attract buyers. "There are people out there who will buy a car if the price is right."

South Africans are currently not only wanting fewer cars, but they also looking for cheaper vehicles, Mike von Höne, chief executive of TransUnion Auto Information Solutions, points out.

He notes that passenger vehicles priced under R200 000 comprised 63% of all sales in this sector. In contrast, used vehicles costing less than R100 000 made up 53% of all sales.

- Sake24.com

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