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Jan 23, 2008

WesBank launches auto indicator

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WesBank|South Africa|National Association Of Automobile Manufacturers Of South Africa|Chris De Kock
wesbank|south-africa|national-association-of-automobile-manufacturers-of-south-africa|chris-de-kock
© Reuse this Financial institution WesBank on Wednesday launched its first vehicles sales confidence indicator, which is aimed at measuring current and future market activity.

The indicator measured a level of activity of 5,6 in September last year, which was ‘inactive'. At December 2007, the three-month indicator was 5,4, but it was expected that it would rise to 6 and to 6,5 in the next six to 12 months, respectively.

The market was labelled as inactive for a number of reasons, 87% of respondents identified increased interest rates and the National Credit Act (NCA), and one in four respondents mentioned higher fuel prices.

Sales and marketing director Chris de Kock said that the level of activity on the showroom floor should start to plateau and then grow again toward the latter part of 2008. He added that dealers and dealer staff were more optimistic that the gear-up for 2010 would create increased demand for light delivery vehicles and heavy commercial vehicles.

He noted that the drop in vehicle sales seen last year had been off a very high base.

De Kock explained that the indicator was born out of a desire for consistent information about the "health" of the market.

The indicator presents confidence in vehicle sales as a measurable statistical score, and provides something different to the monthly National Association of Automobile Manufacturers of South Africa figures in that it allows for a forecast as opposed to purely historical figures.

WesBank teamed up with an independent research house to produce two sample surveys performed on 500 candidates drawn from vehicle sales people, dealer principals, dealer general managers, franchise directors and vehicle sales managers.

The sample was taken across the country and represents an even distribution of candidates from all manufacturers, brands and franchises. Participants responded to a series of market-related questions with answers on a scale of one to ten, ranging from highly inactive at the bottom to highly active at the top of the scale.

Tracking trends


In addition to the confidence indicator WesBank has identified key headline trends taken from its book, which, owing to the size of its customer base, could be deemed large enough to represent overall market activity.

WesBank said it had seen a significant growth in the emerging African market, with this particular demographic up 15% year-on-year in an otherwise declining buyers market.

De Kock noted that last year black buyers accounted for over 34% of the finance company's book, compared with 17% in 2004. Within the grouping, African female buyers in the 26 to 30-year age group were also found to be particularly active.

De Kock commented that the demographic had been a "very strong contributing factor to the growth of the industry".

WesBank also found that increasing numbers of customers were opting for longer finance contracts on their passenger vehicles, notably an increase in those extending the finance period longer than 60 months. In the fourth quarter of 2007, some 24,7% of customers elected the over 60-month finance period. This facility had not been available prior to the introduction of the NCA, and the majority of buyers, about 90% elected to finance over a 54-month period.

De Kock said that he did not expect this trend to continue, as the capital reduction was much slower causing the loan value to remain higher than the value of the vehicle for a far longer period, and thereby limiting the customer's ability's to replace the vehicle.

Another trend identified during last year was that more customers elected a fixed rate, rather than linked rate. A fixed rate allows customers to agree on an interest rate, at the time of signing the agreement, which remains the same regardless of fluctuations during the course of their repayments, while a linked rate changes with the prime interest rate.

Over 60% of customers chose the fixed-rate option from July to December last year, while December customers with the linked rate accounted for just less than 30%.

De Kock said that this trend was likely to stay the same for this year, and possibly drop off should interest rates drop off in 2008.
Edited by: Creamer Media Reporter
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