South Africa’s automotive dealers remained optimistic about new vehicle sales in the year ahead, despite expectations that growth in the new vehicle market would moderate in 2013, vehicle financier WesBank’s Vehicle sales Confidence Indicator (WVsCI) for the first quarter of 2013 revealed.
The study showed an increase in overall confidence levels in sales activity in January to 6.5 out of 10, from 6 recorded in October, which was above the relatively flat results of 2012.
Confidence in future sales activity also increased to 7 for the next three and six months respectively compared with 6.5 and 6.7 in the previous quarters.
WesBank sales and marketing executive head Chris De Kock said the optimism among dealers reflected the fact that simply maintaining the same volume of new car sales in the current year indicated a positive level of business.
“There is a general acceptance that the post-credit crunch recovery in new vehicle sales is over and that the market is expected to return to a normal cycle.
“As predicted from the last indicator, we are starting to see more vehicles that were purchased new over the past three years now coming into the used car market, with these vehicles also increasingly being priced correctly.
“The result of this trend is that this section of the market will start to take some sales back, with better stock levels adding to a conducive environment for the sale of pre-owned vehicles,” he stated.
Confirming this point, on the reasons for consumers opting to buy used rather than new vehicles, 51.4% of dealers cited general demand as being a positive factor, compared with 31% in the previous quarter.
Conversely, on the five factors that would encourage consumers to buy a new vehicle, the introduction of new models was cited as the most likely, with a weighting of 33.7%, with interest rates cited as the second biggest factor with a 29.6% weighting.
De Kock further indicated that the growth in new vehicle sales over the last few years had, in part, resulted from consumers opting for new entry-level models, as the low interest rate environment made the cost of financing a new vehicle significantly more affordable.
However, he said this support would start to decrease, as the next move in interest rates was likely to be an increase.
The WVsCI numbers suggested that the factors that would have the biggest constraint on future activity remained consumers’ financial standing, with credit records and bank approvals having a combined weighting of 38.6%.
Economic factors and trade-in values were the next biggest factors cited, with weightings of 15.6% and 12.9% respectively.
“As a result, while we expect some further growth, this will begin to taper. However, it should be borne in mind that the market is coming off a high base and maintaining growth at current levels is still a sign of healthy demand from consumers,” he noted.