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Anticipating junk status, WesBank sees new-vehicle sales drop 12% in 2016

Chris de Kock

Chris de Kock

9th March 2016

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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Vehicle finance house WesBank expected new-vehicle sales to decline by 12%, or around 34 000 units, this year, said CEO Chris de Kock on Tuesday at the WesBank Car of the Year banquet.

Compared with sales of 617 691 units in 2015, 2016 would end the year at 543 306 units, he predicted.

He said WesBank’s forecast was based on expectations of low economic growth, an increase in interest rates, a downgrade in South Africa’s credit rating and the further deterioration of the rand.

Over the next three years the interest rate would most likely increase by 125 basis points, which should keep inflation within the Reserve Bank’s target bands.

WesBank also expected South Africa’s sovereign credit rating to be downgraded to ‘non-investment grade’, or ‘junk’ status.

Finally, the rand would continue to decline against the dollar, with WesBank forecasting that the rand would reach R17.20 against the greenback in 2019.

“The movement of the rand will be key for the performance of new-vehicle sales in South Africa,” said De Kock.

“A deteriorating currency will force manufacturers to increase prices more aggressively. This will push new-vehicle price inflation well outside that of the headline consumer price index, thus sending more buyers to the used-car market.

“Interest rates will also play an important role in affordability and the demand for credit, as has historically been the case.”

In line with seasonal trends in the market, WesBank had staggered its forecast for 2016’s vehicle sales performance.

WesBank predicted first-half sales to be down 10%, year-on-year.

The second half of the year would be tougher, mainly as a result of accelerated price increases for new cars, as well as higher interest rates.

Passenger car sales in the second half of 2016 would likely decline 15.5%, year-on-year, with light commercial vehicles (LCVs) down 10% for the same period. Sales of larger commercial vehicles were expected to slide 14.4%, year-on-year, as businesses opted not to replace existing assets with new units.

Combined, the full year would see passenger car sales decline by 12%, with LCV sales 10% lower than last year’s performance and truck-and-bus sales down 13.3%.

 

Edited by Creamer Media Reporter

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