Notwithstanding the South African Reserve Bank’s projection that the country’s gross domestic product would grow only by a marginal 2.7% during 2013, local new-car sales were showing good growth of 4.1% to more than 163 000 units during the first three months of the year, up from the comparable period last year.

Standard Bank vehicle and asset finance head Sydney Soundy told a recent media briefing in Johannesburg that the South African vehicle market was enjoying significantly more prosperity than other sectors, which were feeling the brunt of reduced consumer spending and the cost pressures caused by higher inflation and fuel prices, besides other factors.

Since 2010, the petrol price has increased by 69%, while the diesel price has gone up by 74%.

He added that the average South African was still heavily indebted, with the ratio of personal savings to disposable income having shown negative growth since 2005.

Soundy said consumers were taking advantage of the low interest rate, which was at its lowest level in history, and that they still had an appe- tite for secured credit.

Vehicle sales continued to be driven by passenger vehicle and private vehicle purchases, with total vehicle instalment debtors and lessees largely being individuals, who made up 72% of Standard Bank’s instalment and lease book as at February.

“The majority of people applying for vehicle finance are between the ages of 18 and 45, constituting 62.4% of the market. These consumers display the highest level of awareness about technical changes to vehicles taking place in the industry, the brand offerings available, the legislation and the financial offerings available to buyers,” Soundy stated.

He added that manufacturers had reacted accordingly, which had resulted in the diversification of the market.

Further, roughly 65% of consumers were buy- ing cars that cost less than R200 000, with car manufacturers Toyota, Hyundai and Volkswagen among those that have met the need for economical vehicles, capturing 50% of the new-car market in this segment.

Smaller-engine vehicles (less than 1.7 ℓ) have seen the biggest sales growth recently, growing by nearly 12% between 2011 and 2012, compared with 9% and 1% growth for medium (1.8 ℓ to 3 ℓ) and large (3 ℓ plus) engine vehicles respectively.

Soundy pointed out that Standard Bank had, in the first quarter of this year, seen an increase in the number of vehicle finance applications. However, the percentage of applications with deposits had declined, with more consumers seeking to finance vehicles without a deposit.

In addition, alternative financing options, such as rental and leasing options, were gaining traction, despite traditional instalment sale agreements remaining popular.

“Astute consumers are well aware that a vehicle cannot be deemed an asset. They are shifting the risk of vehicle ownership and residual values, and the responsibility of disposing of the vehicle at the end of the contract, to the financier,” Soundy noted.

Commenting on his outlook for the remainder of the year, he said various factors could counter growth in new-vehicle sales. This included the rand exchange rate, continuing high levels of consumer debt and the high level of households with impaired credit records.

Higher food and energy prices, as well as transport costs, including fuel prices, were also expected to impact on consumers’ disposable income, while inflation was expected to be pressurised to remain below the target of 6% in 2013, impacted on largely by the depre- ciation of the rand and higher fuel prices.

However, Soundy pointed out that the continuing current low interest rate environment and the competitive nature of the South African motor industry would provide a potential boost for growth in the market.

Standard Bank vehicle and asset finance divi- sion fleet management head Dr David Molapo said rising fuel prices were also posing a challenge to the fleet industry, with rising vehicle maintenance costs and the ownership-versus-leasing debate adding to the pressure.

“The average transaction for Standard Bank fleet customers [for fuel purchases] has risen from R515 in January 2010 to R833 in December 2012.

“Vehicle maintenance costs, on average, have also increased by about 17% from 2010 to 2012,” Molapo noted, adding that the challenge for the industry in managing the increased costs was to ensure an accurate view of any inefficiencies in the operation of the fleet.

“This can translate into better monitoring of driver behaviour and optimising the reporting of fuel efficiency and other costs against national averages,” he said.

Although there was healthy demand for vehicle leasing in South Africa, many local companies still owned their vehicle fleets, as opposed to their European counterparts.