Local new vehicle sales were expected to grow modestly, but off a low base, by 7% to about 422 800 units in 2010, compared with the 395 230 new vehicles sold in South Africa in 2009, vehicle retailer McCarthy CEO Brand Pretorius said on Friday.

Speaking to journalists at a media briefing in Johannesburg, he said that while there were some signs of a recovery in the global and local economic conditions, the local vehicle industry should continue to remain cautious.

New vehicle sales had slumped by 25,9% in 2009, its largest ever decline, according to figures provided by the National Association of Automobile manufacturers of South Africa and Associated Motor Holdings.

The previous largest drop had been a 24,8% decline recorded in 1985, while 2008 had seen the third largest decline of 21,1%.

The 2009 vehicle sales were well below the record sales of 714 325 units achieved in 2006 and a far cry from the one-million vehicles target that the local industry had once set itself, before the economic crisis hit.

The global and local economic crisis had left a legacy that would remain with the world for many years to come, Brand noted, adding: “The economic wounds are deep and the scars will take a long time to heal”.

He noted that the real economy, and the local manufacturing sector in particular, was still very depressed, while household debt to disposable income in South Africa remained high.

Up to one-million South Africans had lost their jobs in 2009, 40 000 of whom were retrenched from the motor vehicle industry, placing further strain on people’s disposable income.

Further retrenchments were also likely to continue occurring until mid-2010, Brand noted.

While inflation and the prime lending rate came down and the rand appreciated last year, new vehicle prices had increased and the timeframes for replacing cars had lengthened.

Even fleet owners had postponed replacing their vehicles, Brand said.

During 2009, many people had also opted to buy used vehicles, rather than new vehicles.

However, Brand highlighted that vehicle purchases from car rental firms in preparation for the 2010 FIFA World Cup had underpinned passenger vehicle sales in 2009, in some months representing as much as 20% of overall passenger vehicle sales.

Purchases from car rental firms were expected to continue showing growth during the first quarter of the year.

Meanwhile, a number of factors, including the sustainability of the economic recovery and consumer and business confidence, would determine how the vehicle sales market would perform going forward.

A projected 1,5% growth in South Africa’s gross domestic product, more favourable interest rates and higher levels of credit application approvals by banks, boded well for growth in the new vehicle market this year.

Further, the strength of the rand, the competitiveness of the local market and the fact that imported cars were gaining market share, would assist in achieving new vehicle price stability, said Brand, with vehicle affordability being a key aspect to unlocking growth in the sector.

The 2010 FIFA World Cup was expected to lead to improved consumer and business confidence this year.

However, power utility Eskom’s proposed electricity increases of 35% a year over a three-year period and government’s plans to introduce a carbon dioxide emissions tax on all new passenger vehicles sold in South Africa from April onwards, were expected to negatively impact on the country’s economy and on the vehicle sales market.

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