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Johannesburg - There has been an increase in new vehicle prices due to the pressure of exchange rate fluctuations, according to Sydney Soundy, head of Standard Bank vehicle and asset finance.
However, prices of vehicles have grown at a lower rate than that of Consumer Price Inflation (CPI). New Vehicle Prices have grown by 3.79% in 2013.
"There is still demand in the second hand market. This bodes well for the new car market as it enables trade-in to be feasible," said Soundy.
However, 2013 experienced a negative growth in used car pricing, ending the year 2.2% down from 2012.
"The South African vehicle market remains competitive. With South Africans crazy about cars, manufacturers are pushing creative marketing and incentive programmes as they fight for market share," said Soundy.
"New model introductions, extended warranties, service plans and sales incentive schemes will remain prevalent in a consumer friendly sales environment."
Financial institutions have also created a wide variety of financing options to meet the needs of consumers.
January sales
The National Association of Automobile Manufacturers of SA (Naamsa) experienced 13.7% more sales in January 2014 than December 2013.
Month on Month all goods types experienced negative growth apart from passenger and light commercial vehicles, which contributed to this month’s growth, according to Soundy.
Passenger and Light Commercial vehicles grew by 15.6% and 15.1% respectively.
A year-on-year (YoY) monthly comparison shows a decrease of -6.8% in January 2014 compared to January of 2013.
All goods types had negative growth year on year apart from buses, which had 48.7% growth and medium commercial vehicles, which remained flat.
Passenger and light commercial vehicles declined by -7.0% and -6.6% respectively.
The average number of sales for January since 2010 has been 48 321 (excluding January 2014) and on average January has ranked as the 8th best month since 2010.
January 2014 has exceeded the average by 4 704 more vehicles.
Vehicle imports
"Softer growth in the trade sector can be explained by the more challenging environment faced by the consumer. This is reflected in low consumer confidence levels," said Soundy.
Due to the Euro Zone crisis, a number of European car makers have been moving some of their manufacturing plants or facilities into Asia to take advantage of low operating costs.
In 2013 imported vehicles made up 59.8% of the total vehicles sold in South Africa.
This is a huge increase in imports compared to ten years ago, when in 2003 imported vehicles only made up 21.2% of the total vehicles sold, said Soundy.
From the 389 461 imported vehicles sold in 2013, 86.6% were passenger cars. Imported passenger vehicles make up 74.8% of the total passenger market.
In 1994 South Africa only imported vehicles from five different countries, while in 2013 imported vehicles came from 31 different countries.
The top three countries from which South Africa imported vehicles in 2013 were India (97 167), South Korea (62 058) and Germany (56 997).
In 2004 only 1.2% of all imports came from India, accounting for 0.3% of all new vehicle sales.
In 2004 there was only one vehicle manufacturer that imported vehicles from India. In 2013 there were ten different manufacturers of vehicles that imported from India.
This has changed tremendously with imports from India now account for 14.9% of all new vehicles sold, said Soundy.
Value and price
With developed economies growing incrementally a renewed demand in the car market has come about, prompting car prices to rise with the demand, said Soundy.
Trans Union published their 2013 annual figures highlighting that South Africa’s new vehicle prices have grown by 3.7% year on year.
New vehicle pricing was impacted by various aspects, such as the exchange rate fluctuation and carbon emissions tax.
"From a Standard Bank perspective the value of average financed deals has grown by 7.8% year on year, while the prices of new passenger vehicles have grown on average at 13.0% year on year in 2013," said Soundy.
Vehicle price inflation on used car prices ended the year in negative territory, with prices 2.2% lower than 2012.
Gap widening
"With the gap between new and used vehicles widening by 5.9%, the pre-owned market will become more attractive, potentially giving rise to fresh sale opportunities in the pre-owned market," said Soundy.
"Replacement demand for new cars will also probably continue to soften in 2014 as the rapid growth in the new car market seen between 2010 and 2012 softens with the replacement cycle reaching its peak."
2014 vehicle sales prospects
Last year ended as the third best year for domestic sales, and thus the baseline from which to project growth in 2014 is fairly high, said Soundy.
With that in mind and taking into account the last few months’ lack of growth, it is expected that the year ahead will experience significantly muted growth. Factors that will inhibit growth will have a far greater impact than those that are likely to assist growth, he said.
Exchange Rate fluctuations will also have an impact on vehicle pricing.
With approximately two-thirds of vehicles sold in RSA being imported (Naamsa) pricing will be vulnerable to a depreciating rand.
However, prices of vehicles have grown at a lower rate than that of Consumer Price Inflation (CPI). New Vehicle Prices have grown by 3.79% in 2013.
"There is still demand in the second hand market. This bodes well for the new car market as it enables trade-in to be feasible," said Soundy.
However, 2013 experienced a negative growth in used car pricing, ending the year 2.2% down from 2012.
"The South African vehicle market remains competitive. With South Africans crazy about cars, manufacturers are pushing creative marketing and incentive programmes as they fight for market share," said Soundy.
"New model introductions, extended warranties, service plans and sales incentive schemes will remain prevalent in a consumer friendly sales environment."
Financial institutions have also created a wide variety of financing options to meet the needs of consumers.
January sales
The National Association of Automobile Manufacturers of SA (Naamsa) experienced 13.7% more sales in January 2014 than December 2013.
Month on Month all goods types experienced negative growth apart from passenger and light commercial vehicles, which contributed to this month’s growth, according to Soundy.
Passenger and Light Commercial vehicles grew by 15.6% and 15.1% respectively.
A year-on-year (YoY) monthly comparison shows a decrease of -6.8% in January 2014 compared to January of 2013.
All goods types had negative growth year on year apart from buses, which had 48.7% growth and medium commercial vehicles, which remained flat.
Passenger and light commercial vehicles declined by -7.0% and -6.6% respectively.
The average number of sales for January since 2010 has been 48 321 (excluding January 2014) and on average January has ranked as the 8th best month since 2010.
January 2014 has exceeded the average by 4 704 more vehicles.
Vehicle imports
"Softer growth in the trade sector can be explained by the more challenging environment faced by the consumer. This is reflected in low consumer confidence levels," said Soundy.
Due to the Euro Zone crisis, a number of European car makers have been moving some of their manufacturing plants or facilities into Asia to take advantage of low operating costs.
In 2013 imported vehicles made up 59.8% of the total vehicles sold in South Africa.
This is a huge increase in imports compared to ten years ago, when in 2003 imported vehicles only made up 21.2% of the total vehicles sold, said Soundy.
From the 389 461 imported vehicles sold in 2013, 86.6% were passenger cars. Imported passenger vehicles make up 74.8% of the total passenger market.
In 1994 South Africa only imported vehicles from five different countries, while in 2013 imported vehicles came from 31 different countries.
The top three countries from which South Africa imported vehicles in 2013 were India (97 167), South Korea (62 058) and Germany (56 997).
In 2004 only 1.2% of all imports came from India, accounting for 0.3% of all new vehicle sales.
In 2004 there was only one vehicle manufacturer that imported vehicles from India. In 2013 there were ten different manufacturers of vehicles that imported from India.
This has changed tremendously with imports from India now account for 14.9% of all new vehicles sold, said Soundy.
Value and price
With developed economies growing incrementally a renewed demand in the car market has come about, prompting car prices to rise with the demand, said Soundy.
Trans Union published their 2013 annual figures highlighting that South Africa’s new vehicle prices have grown by 3.7% year on year.
New vehicle pricing was impacted by various aspects, such as the exchange rate fluctuation and carbon emissions tax.
"From a Standard Bank perspective the value of average financed deals has grown by 7.8% year on year, while the prices of new passenger vehicles have grown on average at 13.0% year on year in 2013," said Soundy.
Vehicle price inflation on used car prices ended the year in negative territory, with prices 2.2% lower than 2012.
Gap widening
"With the gap between new and used vehicles widening by 5.9%, the pre-owned market will become more attractive, potentially giving rise to fresh sale opportunities in the pre-owned market," said Soundy.
"Replacement demand for new cars will also probably continue to soften in 2014 as the rapid growth in the new car market seen between 2010 and 2012 softens with the replacement cycle reaching its peak."
2014 vehicle sales prospects
Last year ended as the third best year for domestic sales, and thus the baseline from which to project growth in 2014 is fairly high, said Soundy.
With that in mind and taking into account the last few months’ lack of growth, it is expected that the year ahead will experience significantly muted growth. Factors that will inhibit growth will have a far greater impact than those that are likely to assist growth, he said.
Exchange Rate fluctuations will also have an impact on vehicle pricing.
With approximately two-thirds of vehicles sold in RSA being imported (Naamsa) pricing will be vulnerable to a depreciating rand.
