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Johannesburg - The high cost of fuel is likely to affect demand for vehicles, prompting South Africans to defer their purchasing decisions to later in the year and to downgrade their cars to smaller, fuel-efficient models.
This is according to the Wesbank Vehicle Confidence indicator for the second quarter. The indicator is based on interviews with 250 new car dealers around the country.
The indicator found that average monthly fuel expense has now reached R1 412.60, a 46% increase on the 2007 monthly average, which means that South Africans are now spending more on petrol than on their monthly vehicle instalments.
The average vehicle instalment now stands at R2 609, an increase of 18% from 2007, when the WesBank indicator first began recording the data.
"The petrol price will have a negative effect on car sales in the next six to eight months," said Chris de Kock, Wesbank head of sales and marketing.
"It is affecting affordability and as a result people are buying smaller cars and financing their purchases over longer periods."
The indicator recorded a confidence level of 6.5 out of a possible 10 for the second quarter - the same level as the previous three-month period, showing that although trading conditions in the market are still buoyant, car dealers are anticipating a more sedate second half of the year.
The number of vehicles sold in South Africa so far this year is 186 284. The total sold in 2010 was 495 956 and the widely held market view, supported by Wesbank, is for a 15% increase in sales over this number for 2011.
Aside from high fuel prices impeding affordability, stock shortages from Japan are also set to affect the industry negatively although the extent of this is still unclear. Car makers such as Toyota and Nissan have indicated that their production and sales will be hit.
Another threat to the industry is anticipated interest rate hikes. Analysts are divided between a hike in the fourth quarter of this year or early next year.
"The South African consumer still has high levels of household debt and that makes him vulnerable to interest rate increases," said De Kock.
- Fin24