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Cape Town - New car sales in South Africa decreased 1.5% year-on-year in September and by 3.27% month-on-month to 54 281 units, the National Association of Automobile Manufacturers (Naamsa) said on Tuesday.
The average sales per day in September 2013 were 2 262 compared to 2 296 in September 2012.
Exports in September showed a decrease of 69% compared to August 2013 and a decrease of 75% compared to September of last year.
According to Sydney Soundy, head of vehicle and asset finance at Standard Bank, the drop in sales is largely attributed to the labour strike action in the motor industry.
It affected the exports sales numbers more, given that sales in the local market is largely made up of imported vehcicles.
The financial impact that the recent strikes in SA have had on the industry is estimated to be around R20bn lost in production revenue.
From a production point of view Naamsa has reported that the strikes have cost the industry around 3 000 cars per day amounting to R600m a day and in total 45 000 cars lost, said Soundy.
"However, the main concern of the recent industrial action is impact on foreign direct investment into the industry."
Cyril Zhungu, general manager: motor division at WesBank said the latest figures are in line with WesBank’s expectations in the wake of last month’s strike action in the automotive industry.
“This is a significant decrease in the export market and we have seen an almost immediate impact due to last month’s industrial action in the sector," said Zhungu.
"We also anticipate the negative impact on exports to continue into October. However, we are only starting to see the impact of the supply shortages on the local sales.”
Trends
The average number of sales for September since 2010 has been 50 425 (excl September 2013) and on average September has ranked as the fourth best month since 2007, said Soundy.
The sales of 54 281 in September 2013 has surpassed the average number of sales and has ranked the fifth best month this year and 13th best out the last 81 months.
Soundy said vehicle sales volumes may still be boosted by the prime interest rate, which remains at its lowest for over three decades.
"This continues to play a major part in maintaining the South African consumer’s appetite for debt, despite pressures due to high debt to disposable income levels," said Soundy.
Vehicle price inflation (VPI) for the second quarter has so far remained below inflation.
However, the rand has been under pressure against all major currencies, and this will have a negative knock-on effect on VPI.
VPI on new cars has increased quarter on quarter to 3.0% compared to the 2.4% in the first quarter.
In contrast VPI for used car prices has decreased to -2.5% from -1.4% in the first quarter of 2013.
Vehicle purchasing cycle
"The industry is currently still experiencing the impact of the replacement cycle," said Soundy.
"This refers to the vehicle purchasing cycle. The cycle is approximately five years."
Small engine sized vehicles have been the vehicle of choice. Of all passenger cars, small engine size cars make up 65% of the total market (2013), which has grown from 64% in 2012.
With the influx of small engine cars now having mid-range specs manufacturers are attracting the cost conscious consumer to this category.
He said 2007 was a massive year in the industry with 623 850 new vehicles financed.
"At the end of a five year term most maintenance/service plans have come to an end and consumers risk large cash outlays in the event of damage to their cars," he said.
"In light of that and with intentions of recouping some value from a depreciating asset consumers tend to purchase newer more cost effective vehicles."
The cycle should lead to a peak in 2013, but certain factors are expected to provide subduing effects on vehicle sales numbers.
These include the expected low GDP growth, the labour disputes that have halted production in the motor industry at an estimated cost of approximately 2 000 units in August.
With some manufacturer shutting down for approximately a month, September’s loss is likely to be far larger.
The volatility in the exchange rate will increase food, energy and transport costs and will also have a negative impact on consumers’ disposable income, said Soundy.
Global picture
By 2011 there were 165 vehicles per 1 000 inhabitants in the world, 169 per 1 000 on average in South Africa and 790 per 1 000 inhabitants in the USA.
South Africa contributes only 2% of new car sales to the total of the Brics countries’ total sales, according to Soundy.
South Africa's new car sales so far this year equates to 3% of China's sales so far this year. China is the largest new car sales market in the world with over 19 million new cars sold in 2012.
- Fin24
The average sales per day in September 2013 were 2 262 compared to 2 296 in September 2012.
Exports in September showed a decrease of 69% compared to August 2013 and a decrease of 75% compared to September of last year.
According to Sydney Soundy, head of vehicle and asset finance at Standard Bank, the drop in sales is largely attributed to the labour strike action in the motor industry.
It affected the exports sales numbers more, given that sales in the local market is largely made up of imported vehcicles.
The financial impact that the recent strikes in SA have had on the industry is estimated to be around R20bn lost in production revenue.
From a production point of view Naamsa has reported that the strikes have cost the industry around 3 000 cars per day amounting to R600m a day and in total 45 000 cars lost, said Soundy.
"However, the main concern of the recent industrial action is impact on foreign direct investment into the industry."
Cyril Zhungu, general manager: motor division at WesBank said the latest figures are in line with WesBank’s expectations in the wake of last month’s strike action in the automotive industry.
“This is a significant decrease in the export market and we have seen an almost immediate impact due to last month’s industrial action in the sector," said Zhungu.
"We also anticipate the negative impact on exports to continue into October. However, we are only starting to see the impact of the supply shortages on the local sales.”
Trends
The average number of sales for September since 2010 has been 50 425 (excl September 2013) and on average September has ranked as the fourth best month since 2007, said Soundy.
The sales of 54 281 in September 2013 has surpassed the average number of sales and has ranked the fifth best month this year and 13th best out the last 81 months.
Soundy said vehicle sales volumes may still be boosted by the prime interest rate, which remains at its lowest for over three decades.
"This continues to play a major part in maintaining the South African consumer’s appetite for debt, despite pressures due to high debt to disposable income levels," said Soundy.
Vehicle price inflation (VPI) for the second quarter has so far remained below inflation.
However, the rand has been under pressure against all major currencies, and this will have a negative knock-on effect on VPI.
VPI on new cars has increased quarter on quarter to 3.0% compared to the 2.4% in the first quarter.
In contrast VPI for used car prices has decreased to -2.5% from -1.4% in the first quarter of 2013.
Vehicle purchasing cycle
"The industry is currently still experiencing the impact of the replacement cycle," said Soundy.
"This refers to the vehicle purchasing cycle. The cycle is approximately five years."
Small engine sized vehicles have been the vehicle of choice. Of all passenger cars, small engine size cars make up 65% of the total market (2013), which has grown from 64% in 2012.
With the influx of small engine cars now having mid-range specs manufacturers are attracting the cost conscious consumer to this category.
He said 2007 was a massive year in the industry with 623 850 new vehicles financed.
"At the end of a five year term most maintenance/service plans have come to an end and consumers risk large cash outlays in the event of damage to their cars," he said.
"In light of that and with intentions of recouping some value from a depreciating asset consumers tend to purchase newer more cost effective vehicles."
The cycle should lead to a peak in 2013, but certain factors are expected to provide subduing effects on vehicle sales numbers.
These include the expected low GDP growth, the labour disputes that have halted production in the motor industry at an estimated cost of approximately 2 000 units in August.
With some manufacturer shutting down for approximately a month, September’s loss is likely to be far larger.
The volatility in the exchange rate will increase food, energy and transport costs and will also have a negative impact on consumers’ disposable income, said Soundy.
Global picture
By 2011 there were 165 vehicles per 1 000 inhabitants in the world, 169 per 1 000 on average in South Africa and 790 per 1 000 inhabitants in the USA.
South Africa contributes only 2% of new car sales to the total of the Brics countries’ total sales, according to Soundy.
South Africa's new car sales so far this year equates to 3% of China's sales so far this year. China is the largest new car sales market in the world with over 19 million new cars sold in 2012.
- Fin24
