Sales of new vehicles in August were disappointing, and did not provide any evidence of a sustainable upturn, said McCarthy CE Brand Pretorius on Wednesday.

According to the latest statistics released by the National Association of Automobile Manufacturers of South Africa (Naamsa) and Associated Motor Holdings, total sales declined by 23,2% to 33 867 units compared with August last year.

August sales also recorded a decline of 1,8% compared with July 2009.

“The total vehicle market is currently about half the size of what it was at the peak of the market in 2006 and 2007,” noted Pretorius.

In August 2006, new vehicle sales reached 65 820 units.

Pretorius said this comparison illustrated the severity of the downturn the industry had been experiencing over the last two years.

“It is without precedent in recent history. The only consolation is that market conditions are not getting worse – it appears as if we have reached the bottom of the cycle.”

Passenger vehicle sales in August declined by 21,1% compared with the same month last year, to end the month on 22 424 units. Light commercial vehicles recorded a 22,3% drop in sales.

“It is clear that both corporate and private buyers remain cautious, as private buyers in particular are avoiding additional debt, despite a more favourable interest rate environment,” said Pretorius.

“Strict lending criteria, resulting in a relatively high credit application rejection rate, are also inhibiting sales.”

The medium- and heavy-commercial segments were particularly hard hit, and Pretorius believed the slowdown in economic activity was the root cause of the problem.

Sales in the medium commercial vehicle segment declined by 40,7% to 527 units, while the heavy commercial vehicle segment numbered 940 units – a 51,7% drop in sales.

“It seems likely that these same fundamentals will continue to prevail until early 2010,” said Pretorius.

“Hopefully levels of household debt will be significantly lower by then, which should increase the propensity to buy.

“Simultaneously, both business and consumer confidence should benefit from World Cup soccer 2010.

“Until then, it is probable that sales will continue to be subdued.”

WESBANK TROUBLED OVER CAR REPLACEMENT CYCLE, TRUCK MARKET

Vehicle financier Wesbank stated its concern on Wednesday that some factors might be delaying the local market's recovery.

“We are concerned that the extended terms over which consumers choose to finance their cars is having a marked negative impact on new sales," said Wesbank sales and marketing executive head Chris de Kock.

"With more than 80% of finance agreements now being done over 60 months and more, we are undoubtedly seeing it take effect on the average new car replacement cycle."

Looking at the Naamsa figures for commercial vehicles, it was evident that South African businesses, particularly those operating in the transport and logistics sector, were still under severe pressure, added De Kock.

“We have a number of transport operators that have approached us for assistance, and we have given them guidance and advice to weather the storm.

"In instances where transport operators have financed every single truck in their fleet and have very little other equity in the business, it becomes quite difficult. But certainly, we are trying to assist as much as we can."

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