Nov 26, 2010
Car importers more bullish than local-brand dealers as rand strengthensBack
Africa|Hyundai|Rental|WesBank|Africa|South Africa|Automotive|Bank Approvals|Chris De Kock|A Vehicle Replacement Cycle|Credit Records|The 2010 FIFA World Cup
© Reuse this
Wesbank sales and marketing head Chris de Kock says that there has been strong growth in the sale of imported vehicles in recent months, as a result of the rand’s strength-ening against a basket of major currencies, and of the fact that local production lines experienced disruptions in the second half of the year owing to labour action in the automotive industry, which caused a delay in the delivery of these vehicles to customers and a degree of import replace-ment.
“Associated Motor Hold-ings, [importing Hyundai, Kia, Daihatsu, for example], are giving the local guys a good run for their money, mostly on the back of great product,” says De Kock.
The WVsCI shows that the overall confidence level among vehicle dealers remains stable, at 5,7 out of 10, down from the 5,9 recorded in July.
De Kock attributes the decline to the strike action in the motor industry, and the introduction of the new carbon tax in September.
Another of the most notice-able trends in the latest results is the significant increase in confidence and activity in the used-vehicle market.
According to the data, 61% of the dealers surveyed say that they will describe the used-vehicle market as more active than the new-vehicle market, compared with 45% in July.
Data from the WesBank book confirms this sentiment. Since July, WesBank’s used-to-new ratio has increased from 1,63, to 1,91 used cars financed for every new car financed.
According to De Kock, this is driven by stock shortages in the new-car market, as well as rental companies defleeting after the 2010 FIFA World Cup.
Another key finding is the surge in the percentage of dealers who cited affordability as the most common factor preventing them from con-verting leads to sales, jumping from 13,1% in July to 21,6% in October.
In contrast, those citing bank approvals as the main reason fell from 25,2% to 18,5%.
According to De Kock, there are a number of factors that point towards positive sales growth in the vehicle market – commercial vehicles included – in 2011.
These include lower debt servicing costs owing to the favourable interest rate environment, low expected new-vehicle price inflation, and an upward trend in business and consumer con-fidence.
“It has never been more affordable to buy a car,” says De Kock. “We have seen a noticeable increase in the demand for credit.”
However, he says there are still challenges that may hamper new-vehicle sales, such as a high household-debt-to-disposable-income ratio (at around 80%), an increasing number of consumers with impaired credit records, and a vehicle replacement cycle that gets longer.
This last factor is backed by data gleaned from WesBank’s own book, which shows that the average deal duration for new vehicles increased to 65 months in September.
“To put this into context, the average deal duration recorded in September 2006 was less than 30 months,” says De Kock.
He adds that, although Wesbank may be receiving a growing number of credit applications, “we have limited opportunities to convert these into business”.
De Kock also notes that there is a visible buy-down trend in the market, with the Wesbank book up 40% in terms of new business volume, but only 30% in value.
He says he does not expect South Africa’s new vehicle market to “show massive gains” in 2011.
Edited by: Martin Zhuwakinyu© Reuse this Comment Guidelines
Other Automotive News
Updated 1 hour 16 minutes ago South African engineering union Numsa has agreed to end a four-week strike after accepting a wage increase offer from employers, union leader Irvin Jim said on Monday. Numsa, South Africa's largest union, has accepted a 10% annual pay rise fixed for three years for...
Updated 1 hour 41 minutes ago Trade union Solidarity on Monday accepted the Steel and Engineering Industries Federation of South Africa’s (Seifsa’s) revised wage offer. The three-year wage agreement, settled within the Metal and Engineering Industries Bargaining Council (MEIBC), comprised...
Updated 2 hours 11 minutes ago South Africa will use the upcoming US-Africa Leaders' Summit, which will also encompass the 2014 edition of the Africa Growth and Opportunity Act (Agoa) Forum, to appeal for a 15-year extension of the nonreciprocal trade arrangement, as well as South Africa’s...
Recent Research Reports
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
Real Economy Insight: Steel 2014 (PDF Report)
This four-page brief covers key developments in the steel industry over the past 12 months. It provides an overview of the global and South African steel and stainless steel markets, South Africa’s major steel producers and events that have shaped these markets.
This Week's Magazine
Multinational semiconductor chipmaker corporation Intel announced its national campaign to further acquire partners to drive its She Will Connect programme, an initiative that aims to expand digital literacy skills to young women in developing countries, further into...
South Africa's MeerKAT radio telescope array programme should get back on schedule within a few months. This assurance has been given by SKA South Africa (SKA SA) associate director: science and technology Prof Justin Jonas. Early last month, Science and Technology...
The Passenger Rail Agency of South Africa’s (PRASA’s) Metrorail service will remain a subsidised service following its current multibillion-rand rolling stock, station, depot and signalling upgrade programme. PRASA group CEO Lucky Montana has allayed fears that...
The uncertainties around the remediation of affected areas as addressed in the Contaminated Land Provisions in the National Environmental Management: Waste Act No 59 of 2008 will possibly spark litigation and disputes between landowners and businesses, contractors...
South Africa is currently the largest component of the African Development Bank’s (AfDB’s) active portfolio in Southern Africa, comprising 62.5% of the bank’s $7.9-billion exposure to the 12-country region – the second largest beneficiary is Mauritius, which...