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May 13, 2009

Vehicle sales confidence drops further

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Wesbank executive head of sales and marketing Chris de Kock discusses the outlook for vehicle sales in South Africa in 2009 (Videographer: Nicholas Boyd; Editing: Darlene Creamer)
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Credit availability among consumers and corporates remained one of the biggest hindrances to the growth of the vehicle sales market, Wesbank executive head of sales and marketing Chris de Kock said on Wednesday.

Speaking at the release of Wesbank’s quarterly vehicle sales confidence index (WVSCI), De Kock noted that confidence levels had dropped further to 4,2 in the quarter ended April, representing an 18% decline year-on-year.

The WVSCI had declined from 5,1 in April 2008, and from an already low level of 4,4 in the previous quarter, ended January 2009.

About 90% of respondents had indicated that the market was not active during the quarter.

Consumers’ decision to buy new vehicles was mainly influenced by credit factors and, to a lesser extent, mindset factors, highlighted Wesbank.

The vehicle financier said that a higher percentage of the population now had adverse credit records as a result of the volatility in the global economy, making it more difficult for them to access financing.

Further, many consumers still had a very high debt-to-income ratio, which affected their ability to afford new vehicles.

Consumers’ decision to buy new vehicles was also being influenced by higher new vehicle pricing, as well as uncertainty about the employment outlook.

However, the vehicle financier expected the 4,2 level to be the lowest level the WVSCI would reach in the current downward cycle, but De Kock conceded that it was difficult to forecast what might happen in light of the volatility in global economic conditions.

Nevertheless, there were some signs that conditions were starting to normalise, he said.

De Kock noted that credit availability would start to improve, as customers were deleveraging and paying off their debts to reach more manageable levels.

Further consolidation by dealers, and by original equipment manufacturers, would also start to benefit the industry, while the used car market would continue to support the industry.

De Kock expected the remainder of this year to be tough for dealers, but said that dealers were expecting to start seeing an improvement in conditions in the last quarter of the year and early 2010.

About 20% of respondents to the WVSCI had expected conditions to start improving in the next three months, while 63% were only expecting to see an improvement in the first quarter of 2010.

However, De Kock noted that the June WVSCI could show positive growth in confidence levels for the first time in a year.

Edited by: Mariaan Webb
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