New car sales have hit the ceiling | Fin24
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New car sales have hit the ceiling

Jun 01 2015 21:15
Matthew le Cordeur

Cape Town – Car sales have likely reached their ceiling in the current economic climate, a researcher said after trade results showed a further decline in new car sales in May.

At 47 868 units, new vehicle sales were down 3.2% from the 49 449 vehicles sold in May last year, according to Naamsa (National Association of Automobile Manufacturers of SA) on Monday.

The new car market, at 31 201 units, reflected a decline of 1 773 units or a fall of 5.4% compared to the 32 974 new cars sold in May last year.

Despite incentive packages to promote demand, intense competition in a difficult trading environment continued to pressurise the domestic new car market, Naamsa said.

Wesbank: Dealers and manufacturers can’t complain

WesBank head of research Rudolf Mahoney said this was the first time in two years that sales figures recorded a decline in two consecutive months.

However, he said that sales should only shift by 1% for the overall year, because of the “historically high base”.

“If we maintain these levels, none of the dealers and manufacturers can complain,” he said.

“Currently, the levels are quite healthy given that our GDP is growing at 1.5%.

“We have probably reached the ceiling of what is currently possible in current economy,” he added.

Low consumer confidence

Overall, out of the total reported industry sales of 47 868 vehicles, an estimated 40 575 units or 84.8% represented dealer sales, 6.9% constituted sales to government, 4.7% to industry corporate fleets and 3.5% represented sales to the vehicle rental industry.

Mahoney attributed the reduction in car sales to low consumer confidence, which was highlighted by a low FNB consumer confidence index and RMB/BER business confidence index.

“The new petrol price coming into effect will take petrol increases to 18% since the start of the year,” he added. “All these increases are impacting on consumer sentiment taking on new purchases.

“It is also becoming clearer that we will see an interest rate increase before the end of year,” he said. “All of these are causing concerns for consumers.

Consumers prefer used cars

“Macro vehicle price inflation increased by 7.6% (1.6% on used cars) and headline inflation increased by 4.5%,” he said, “so new cars are becoming a lot more expensive.”

“New car applications decreased by 7% and 2% for used cars year to date,” he said. “Customers are starting to hold back a bit and are also shifting to used cars.”

The ratio of used to new car applications is almost 2:1, he said. “Customers are uncertain and so are holding on to cars for longer,” said Mahoney.

Mahoney said that during the 2007/8 recession, the replacement cycle on new cars was 45 months and that came down to 34 months during the post-recession period.  “There will be a surge in vehicle sales again,” he explained.

Expect better sales from June

“June will be a better month as it is the quarter close-end for dealers,”said Mahoney. “There will be a lot of specials and a lot of marketing activity.

“They will stimulate the market.”

Mahoney said the strongest sales months were from July to October, which is when researchers will gauge the situation.

Rental companies are shifting their refleeting purchases to the second half of the year and they will blow the sales figures “out of the water”.

“The strong months are coming,” he concluded.

Top 10 SUV sellers for May:

wesbank  |  naamsa  |  car sales


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