'Modest' rise for 2010 car sales

Johannesburg - There were signs of hope in the South African car sector for modestly better domestic sales in 2010, the National Association of Automobile Manufacturers (Naamsa) said on Friday.

It also forecast higher levels of production on the back of continued recovery in demand in export markets.

"Given the close correlation between the performance of the South African economy and international financial and economic trends, uncertainties about the medium-term direction of the global economy made forecasting difficult," Naamsa said.

Naamsa said although the local economy had officially moved out of recession, economic activity levels remained relatively subdued, with a severe contraction in private sector credit demand and continued steps by corporations and households to reduce debt.

"Much would depend on further improvement in consumer sentiment and business confidence."

In this regard, the cumulative 5% decline in interest rates between end 2008 and August 2009 should improve the financial position of households and contribute towards an underlying improvement in the growth of vehicle sales in coming months, Naamsa said.

Moreover, the Fifa 2010 World Cup would boost demand in the car rental industry, promote tourism and spending and support further economic recovery, it added.

"Also reduced cost pressures on the back of the exceptionally strong rand should facilitate stable new vehicle pricing for some time."

At this stage, projections for 2010 for the new car market indicated growth of about 6.5%, the light commercial vehicle market by about 8% and sales of medium and heavy trucks and buses also about 8% in volume terms, Naamsa said.

"In aggregate terms, domestic sales are expected to improve from the 395 000 in 2009 to about 423 000 in 2010 - an increase of 7% ... however, the improvement will be off a very low base."

Factoring in the expected modest improvement in domestic sales together with the fairly substantial anticipated growth in exports, 2010 domestic production of motor vehicles in South Africa was expected to rise from about 380 000 vehicles to about 445 000 - an increase of about 17%, Naamsa added.

- Sapa