Nov 26, 2010
Car importers more bullish than local-brand dealers as rand strengthensBack
Hyundai|WesBank|South Africa|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
Recent Research Reports
Steel 2014: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2014 report provides an overview of the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon steel and stainless...
Projects in Progress 2014 - First Edition (PDF Report)
This publication contains insight into progress at the delayed Medupi and Kusile coal-fired projects, in Mpumalanga and Limpopo respectively, as well as at the Ingula pumped-storage scheme, which is under construction on the border between the Free State and...
Automotive 2014: A review of South Africa's automotive sector (PDF Report)
The report provides insight into the business environment, the key participants in the sector, local construction demand, geographic diversification, competition within the sector, corporate activity, skills, safety, environmental considerations and the challenges...
Construction 2014: A review of South Africa's construction sector (PDF Report)
Construction data released during 2013 hints at a halt to the decline in the industry during the last few years, with some commentators averring that the industry could be poised for recovery. However, others have urged caution, noting that the prospects for a...
Electricity 2014: A Review of South Africa's Electricity Sector (PDF Report)
This report provides an overview of the state of electricity generation and transmission in South Africa and examines electricity planning, investment in generation capacity, electricity tariffs, the role of independent power producers and demand-focused initiatives,...
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
This Week's Magazine
The Electronic Systems Laboratory (ESL) of the Department of Electrical and Electronic Engineering at Stellenbosch University is strongly reaffirming its position as one of South Africa’s leading centres for satellite technology and expertise. It is currently...
The world’s lowest-cost diesel-electric locomotive is not made in China, but in Pretoria, at RRL Grindrod Locomotives’ newly upgraded 30 000 m2 plant. The company’s locomotive pricing is “more competitive than any other original-equipment manufacturer (OEM)...
The South African Defence Review 2012, released to the public at the end of last month (despite the year given in its title) recommends the creation of the post of Chief Defence Scientist. This official would be responsible for the management of defence technology...
AltX-listed engineering technology company Ansys has been awarded an R188-million contract by Transnet to supply integrated dashboard display systems to the freight rail utility’s locomotives. Black-owned and controlled Ansys developed the bespoke integrated system...
South Africa’s sole nuclear power station Koeberg, which is located in the Western Cape, breached a major operations milestone on April 4, which marked the thirtieth anniversary of Unit 1 having been connected to the grid. Eskom, which operates the two-unit plant,...