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New-vehicle sales to decline by 33 000 this year – Absa

22nd August 2014

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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Current expectations in the automotive industry are for the domestic new-vehicle market to decline to around 619 000 units in 2014, down from the 651 745 units sold in 2013, says Absa vehicle and asset finance head Wessel Steffens.

“Interest-rate-sensitive sectors in the economy, such as the vehicle sector, will be impacted by the strain on affordability, resulting from a predicted further rate increase in September,” he notes.

“Further interest rate hikes will negatively affect the affordability of and demand for vehicle finance.”

Steffens believes entry-level passenger cars and fresh model releases are likely to continue to be the main contributors to new-vehicle sales in 2014.

Higher new-vehicle price inflation, at 7% for the second quarter of 2014, as a result of the weaker rand, will also impact on the affordability of new vehicles, but have a positive impact on used vehicle sales.

“Although used vehicle price inflation will eventually also be driven higher, it is currently at 1%,” says Steffens.

“Given that many consumers are still highly indebted and finding it difficult to obtain credit for higher-priced vehicles, demand for favorably priced entry-level vehicles and good-quality used vehicles will remain strong.

“The current high fuel prices will also keep consumers focused on buying more fuel-efficient vehicles, with future fuel price trends remaining heavily dependent on movements in the international oil price and the rand:dollar exchange rate.”

Asset finance firm WesBank reports an all-time record for vehicle finance applications in July, at 129 000.

Applications for new-vehicle finance grew by 5%, year-on-year. However, the shift to used vehicles was seen in yet another month of double-digit growth for applications for preowned vehicles, at 15%, year-on-year.

The current decline in the new-car market can be attributed to continued growth in the used car market, where buyers are finding better value for money, concurs WesBank head of research Rudolf Mahoney.

WesBank’s own data, which compares sales of used and new vehicles, shows a ratio of 1.39 used vehicles sold to every one new vehicle – a year-to-date increase of 11%.

The new-car market declined 1% in July, to 39 945 units, compared with the same month last year. The total market declined by 1.5%.

“News of a decline is never great, however, July’s 1.5% decline is a welcome relief after other months this year where we’ve seen declines as high as 10.2%,” says Mahoney.

Truck Market Still Positive
The South African truck market will need to deliver a strong performance in the five months to the end of the year to ensure it remains in positive territory, compared with 2013.

Month-on-month sales dropped by 9.12% in July to 2 622 units. However, the industry is still ahead of 2013’s year-to-date sales, albeit slightly, with 0.56% growth recorded for the first seven months of the year, to 17 760 units, compared with the same period last year.

“As has been the case over the past year, external factors such as slow economic growth, widespread labour unrest, rising interest rates and inflationary pressures continue to dampen growth in the local truck market,” says UD Trucks Southern Africa MD Jacques Carelse.

“Against this backdrop, truck sales have been flat, with results across the different segments largely mixed to negative.”

In the truck and bus market, only the bus and extra-heavy commercial vehicle (EHCV) segments have expanded so far this year.

Year-to-date figures show that bus sales are up 17.63%, to 674 units. The EHCV segment is continuing its strong run with an 8.9% increase to 8 087 units.

However, sales in the medium commercial vehicle segment are 8.18% lower, at 6 087 units, while the heavy commercial vehicle segment is down by 3.99% to 2 912 units.

“We remain cautious in our outlook for the remainder of the year, and expect some above-inflation vehicle price increases from some manufacturers,” says Carelse.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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