Johannesburg - South African vehicle manufacturers finished 2011 on a high, recording their highest sales in five years as a combination of lower interest rates, base effects and concerns about the weaker rand prompted consumers to buy more cars.
Vehicle sales are a key indicator of patterns in consumer spending, which has traditionally driven the economy. Their buoyancy could be a sign that households’ pockets are improving and the economy is on a sustained recovery after a recession in 2009.
The National Association for Automobile Manufacturers (Naamsa) said industry sales for 2011 were at an estimated 571 425 units compared to 492 907 units sold in 2010, a 15.9% growth rate.
Sales recorded double-digit year-on-year (y/y) percentage growth for every month except May in 2011, when parts and some models were hard to come by after an earthquake and tsunami hit supplier Japan. Sales in September jumped to a four-year high of 30% y/y.
“The underlying momentum remains positive and it’s due to historically low interest rates. Vehicle affordability has improved quite significantly,” said Nico Vermeulen, director of Naamsa.
“Also I think the financial institutions have relaxed their credit extension to access vehicle finance and we believe there’s some pent-up replacement demand.”
South Africa’s major banks kept the benchmark lending rate steady all of last year in line with the central bank, which held the rate at which it lends to commercial banks at a three-decade low of 5.5%.
Most South African consumers need bank financing to buy their cars and fears that a sharply weaker rand might push borrowing costs higher have made buyers like Tsholofelo Xaba bring their purchases forward.
“I was nervous about waiting to buy because no one knows what will happen. If I waited longer I might have to pay more, interest rates might go up and my payments would then be higher,” Xaba said.
“So it was either I buy now or things might get worse, but if things get better then it’s okay, I’ll already have my car.”
The rand fell nearly 23% against the dollar last year and further sharp losses this year will add to inflationary pressure and could prompt the Reserve Bank to lift interest rates.
Naamsa said 2011 sales slightly surpassed industry expectations.
“Industry trading conditions, however, remained intensely competitive with over 60 brands and close on 2 200 model derivatives in the new car and light commercial vehicle sectors competing for consumers’ franchise,” Naamsa said.
Xaba said she had been looking to buy a second-hand car but was offered “such a good deal” that she could afford to purchase a new vehicle.
South Africa’s vehicle exports in 2011 were however lower than expected at 272 000 units as natural disasters in Japan and Thailand slowed the production chain.
2012 prospects positiveNaamsa said prospects for the industry this year were positive but depended on the performance of Africa’s biggest economy, while exports would rest on the sustainability of a recovery in the global economy.
“There’s a close correlation between GDP (gross domestic product) growth and vehicle sales,” Vermeulen told Reuters. “We think we will probably in 2012 get back to the sort of levels that were experienced in 2005 or 2007; 2006 is a record that will probably stay for the next two years.”
South Africa saw bumper sales between 2005 and 2007, but these dropped sharply in 2008 and 2009 during the country’s first recession in nearly two decades.
This year’s numbers could be hit by the absence of data from Mercedes-Benz South Africa, which has halted reporting vehicles sales following a directive from German parent company Daimler, which is under investigation for possible violation of antitrust rules.