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Tough times ahead for auto industry

Nov 13 2012 16:03 Sapa

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Johannesburg - The relatively good times of 2012 for the local automotive industry are unlikely to continue next year, credit information company TransUnion warned on Tuesday.

Major dealer groups had seen financial results improve, with new new-vehicle sales up by 10% compared to 2011, continuing cost control and a decline in bad debt.

"But all is not rosy as dealer confidence levels are decreasing when compared to those seen over the past 18 months," said Carel Martin, spokesperson for TransUnion Auto Information Solutions.

"There is good reason for this, as consumer debt continues to grow and reports indicate that households are experiencing further strain."

Other factors which could pressure the industry included rising fuel prices, toll fees for Gauteng drivers, and stabilising vehicle sales volumes.

But continued support programmes from manufacturers, coupled with low interest rates, could potentially boost consumer credit demand.

Low price increases for 2012, which had contributed to growth, were unlikely to be sustained next year as the rand weakened and input costs increased.

Martin predicted continuing pressure for used car dealers, who were selling used vehicles below the recommended retail price in an attempt to counter price discounts and incentives offered by the new vehicle market.

Gross margins in the used vehicle market appeared to have stabilised after the average percentage gap between trade and retail values reached its lowest level in the past four years in June 2012.

"Given the current market conditions, based on positive trends, constant supply and relative price stability seen in 2012, we can expect 2013 to deliver some growth, although it should be less than what we've seen in the past two years," he said.
transunion  |  automotive industry
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