Publications
Partners
Johannesburg - Although well behind the equivalent period last year, it is expected that South Africa's vehicle exports in the second half of 2014 will be buoyed by exports of the new Mercedes Benz C-class, according to Wessel Steffens, head of Absa Vehicle and Asset Finance.
He said SA's new vehicle export growth will be driven by global demand, which is expected to grow on the back of improved world economic growth, as well as manufacturers’ export programmes and an expected weaker rand exchange rate compared with 2013.
The June sales performance at 52 837 was 6.8% up on May sales, but 2.3% down on June 2013.
The year-to-date sales are down 5.3% on the equivalent period last year.
Exports have recovered to just 1% down on the equivalent month last year and are 20.9% down year–to-date.
Most of the decline can be ascribed to the Mercedes Benz C-class replacement being set up for production and the discontinuation of an export model by a major manufacturer.
Passenger vehicles sales, which accounted for 67% of the total, increased by 7.2% on May, while total commercials showed a 6.1% increase.
The car rental industry contribution reduced to 8.3% with sales through dealerships up at 83.8% of the total sales.
Steffens said the current industry view is one of a decline to around 619 000 units from a total of 651 745 units sold in 2013.
Seven week strike
The performance of local and export sales in the first quarter were affected by last year’s seven week strike, according to Nicholas Nkosi, head of Standard Bank Vehicle and Asset Finance - Personal Markets.
"Generally, there is a trend towards smaller more fuel efficient engines in commercial vehicles," he said.
"The buying down trend continues in passenger vehicles, as consumers are looking for fuel efficiency and more powerful small engines in passenger cars."
In addition, private vehicle buyers are increasing their repayment periods and opting for a balloon payment at the end of the repayment period due to increasing living costs.
"Expectations of further interest rate hikes and the possibilities of more vehicle price increases reaffirm forecasts of a slight decline in vehicle sales for the year," he said.
"New vehicle price increases will probably positively impact on used car volumes due to the widening price gap between used and new vehicles."
New vehicle sales in the dealer space are also slowing down, with dealers reporting that in many cases, although finance was approved, customers did not conclude the deal.
There are various model introductions expected in the second half of the year and those already introduced in the first half of the year are expected to boost sales.
More positive performance
WesBank’s data reflected a more positive performance in June, compared to previous months.
Vehicle finance applications for June were up 20.6%, year-on-year, with 13.8% growth for new vehicle applications and used vehicle applications increasing by 24.4%.
“It is encouraging to still see a strong demand for credit in the new vehicle market,” said Rudolf Mahoney, head of research at WesBank.
“However, affordability remains a concern, with a large number of applications being declined due to general affordability concerns.”
Over the last five years, new vehicle sales have significantly outperformed the GDP growth rate, and are now being pulled in line with the South African economy’s actual performance.
On the back of new vehicle price increases, escalating fuel prices, higher living costs associated with CPI that is outside of the Sarb’s target bands, and looming interest rate hikes, new vehicle sales will struggle to gain traction given the prevailing macroeconomic environment.
He said SA's new vehicle export growth will be driven by global demand, which is expected to grow on the back of improved world economic growth, as well as manufacturers’ export programmes and an expected weaker rand exchange rate compared with 2013.
The June sales performance at 52 837 was 6.8% up on May sales, but 2.3% down on June 2013.
The year-to-date sales are down 5.3% on the equivalent period last year.
Exports have recovered to just 1% down on the equivalent month last year and are 20.9% down year–to-date.
Most of the decline can be ascribed to the Mercedes Benz C-class replacement being set up for production and the discontinuation of an export model by a major manufacturer.
Passenger vehicles sales, which accounted for 67% of the total, increased by 7.2% on May, while total commercials showed a 6.1% increase.
The car rental industry contribution reduced to 8.3% with sales through dealerships up at 83.8% of the total sales.
Steffens said the current industry view is one of a decline to around 619 000 units from a total of 651 745 units sold in 2013.
Seven week strike
The performance of local and export sales in the first quarter were affected by last year’s seven week strike, according to Nicholas Nkosi, head of Standard Bank Vehicle and Asset Finance - Personal Markets.
"Generally, there is a trend towards smaller more fuel efficient engines in commercial vehicles," he said.
"The buying down trend continues in passenger vehicles, as consumers are looking for fuel efficiency and more powerful small engines in passenger cars."
In addition, private vehicle buyers are increasing their repayment periods and opting for a balloon payment at the end of the repayment period due to increasing living costs.
"Expectations of further interest rate hikes and the possibilities of more vehicle price increases reaffirm forecasts of a slight decline in vehicle sales for the year," he said.
"New vehicle price increases will probably positively impact on used car volumes due to the widening price gap between used and new vehicles."
New vehicle sales in the dealer space are also slowing down, with dealers reporting that in many cases, although finance was approved, customers did not conclude the deal.
There are various model introductions expected in the second half of the year and those already introduced in the first half of the year are expected to boost sales.
More positive performance
WesBank’s data reflected a more positive performance in June, compared to previous months.
Vehicle finance applications for June were up 20.6%, year-on-year, with 13.8% growth for new vehicle applications and used vehicle applications increasing by 24.4%.
“It is encouraging to still see a strong demand for credit in the new vehicle market,” said Rudolf Mahoney, head of research at WesBank.
“However, affordability remains a concern, with a large number of applications being declined due to general affordability concerns.”
Over the last five years, new vehicle sales have significantly outperformed the GDP growth rate, and are now being pulled in line with the South African economy’s actual performance.
On the back of new vehicle price increases, escalating fuel prices, higher living costs associated with CPI that is outside of the Sarb’s target bands, and looming interest rate hikes, new vehicle sales will struggle to gain traction given the prevailing macroeconomic environment.
