Car sales rev up industry hopes

Johannesburg - A big swing of 41.28% in new vehicle sales between December 2009 and January 2010 has caught experts by surprise as data exceeded market expectations. However, analysts claim December carry-over sales and a delay in the registration of leases could be contributing to the buying surge.

On Tuesday, National Association of Automobile Manufacturers of South Africa (Naamsa) figures showed new vehicle sales of 38 075 units in January 2010 - substantially higher than the December 2009 total of 26 950.

ETM economist George Glynos said the fact that consumers are now able to lease new cars influenced data. "A lease between the customer and a finance company is still registered as a new vehicle sale by Naamsa."

Marcel de Klerk, managing executive of Absa Vehicle and Asset Finance, concurred. He added there was usually a 15% to 16% carry-over from December to January new vehicle sales.

"People buy new vehicles in December, and sometimes they only register them in the new year," said De Klerk.

He said a more accurate reflection would be to compare the sum of December 2009 and January 2010 sales with that of December 2008 and January 2009 figures.

"Combining sales of December 2009 and January 2010 and comparing that to the same period of the previous year shows a 6.3% increase year-on-year," he said.

"It's more realistic, and it's still good news showing us that we have seen the bottom and the market is positive."

Naamsa figures showed new vehicle sales rose 15.5% to 38 075 units in January 2010 from January 2009. However, Naamsa said the data came off a low base and were expected to show an improvement even if the market was still depressed.

Sluggish improvement off a low base

"To illustrate the extent of the base effect, the January market last year represented the worst new car market in over eight years. Nevertheless, total industry sales had improved by 5 112 units, or 15.5%, to 38 075 units from 32 963 in January last year," it said.

For the remainder of 2010, Naamsa said the direction of new vehicle sales would be determined by underlying economic fundamentals.

"The cumulative 5% decline in interest rates between end-2008 and August 2009 should contribute to an improvement in the financial position of households and businesses, and stimulate demand for new vehicles."

Other factors which would influence vehicle sales positively during 2010 include expected economic growth of 2% plus and the 2010 Fifa World Cup.

The soccer tournament would boost demand from the car rental industry, promote tourism and spending, improve vehicle supply and enhance new vehicle affordability on the back of relatively stable new vehicle pricing, it said.

"The general outlook for domestic sales for 2010 was for a slow improvement in demand as the economy emerged from recession. Aggregate domestic sales could increase by between 7% and 10%; however, the improvement would be off a very low base."

- Fin24.com