Photo by: Bloomberg
Strains on consumer affordability, high inflation and more cautious lending by banks were expected to continue dragging on new vehicle sales this year, Imperial Fleet Management (IFM) said on Thursday.
After scaling to its third highest ever number in 2013, vehicle sales were more subdued in 2014, with only 644 523 units sold.
“Overall, 2014 growth disappointed us, and the mid-December power issues – with the possibility of load shedding this early in the new year – combined with the very poor performance of the rand, have made the start to 2015 look shaky,” IFM CEO Nicholas de Canha commented.
He noted that there was some pessimism for 2015 owing to the economy experiencing significantly lower growth than was expected at the beginning of 2014.
“The pressure that the economy is feeling now is seeing the entry-level market experiencing a real deterioration with some spillover in the mid-market also shrinking in size.”
However, De Canha pointed out that the C Segment and bigger vehicle classes had been, and would probably remain, relatively unaffected by the general strain placed on credit approvals.
“In fact, the rate of approvals in this segment looks much the same as it did last year. This layer of the economy is fairly stable, which reflects the pattern we saw following the credit crisis of 2008/9.
Meanwhile, price increases had been more muted than expected, with increases from local manufacturers having averaged almost 4%, while imported brands were in the seven to eight percentage point ranges.
“[There is] some pricing disparity in the market at the moment that will likely continue [this year], where the weaker rand will see this remain with domestic manufacturers in the strong position of avoiding some of these currency impacts,” De Canha said.
However, he noted that, despite more marginal increases, pricing continued to place pressure on the retail market.