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Johannesburg - South Africa's battered automotive industry is bracing itself for another tough year with only timid signs of a recovery, after sales contracted by almost a third in 2009.
The overall drop in new vehicle sales during the first 11 months of the year was 27.1%, or 364 812 units, compared to the 500 562 units sold in the same period last year, according to the National Association of Automobile Manufacturers of South Africa (Naamsa).
Naamsa expects an "uneven and hesitant" recovery in 2010.
One of the biggest obstacles to the sector remains high consumer debt levels, according to one of the country's biggest vehicle loan providers, Wesbank.
South Africans' debt to disposable income ratio stood at 76% in 2009. As a result, households have shied away from long-term debt purchases such as cars. The cumulative 550 basis-point cut since December 2008 is yet to bear any significant fruit for car sellers.
Local car parts are lekker
Retail banks, on the other hand, are still reluctant to lend to those applying for loans.
"You can't lend freely when there is still relative uncertainty about economic circumstances," said Chris de Kock, head of sales and marketing at Wesbank, which is currently approving only half of the total applications it receives.
Meanwhile, South Africa's car makers will be on a drive to increase locally-produced content in vehicles next year.
Component makers have been one of the biggest casualties of the car sector crisis, with plummeting domestic demand and a 40% export decline over the year, according to Naamsa estimates.
Just over a third of the parts used in locally-made cars are produced in South Africa. The industry will be aiming to boost this ratio to at least 70% over the next few years, which will facilitate the production of locally manufactured vehicles.
Car retailers will end off a year of downsizing, with dealership closures in both independent outlets and those controlled by the big corporate companies such as Imperial and Bidvest.
Car dealers in South Africa expanded capacity to meet peak demand of nearly 700 000 units in 2006. A commentator Fin24.com spoke to placed realistic sales volume capacity in South Africa's new vehicle market at around 400 000 to 500 000 units/year.
- Fin24.com