Confidence about sales activity among South Africa’s automotive dealers fell in the second quarter of 2013, following a seasonal spike in the first quarter of the year.

Most significantly, when comparing the second quarter of this year with the same period last year, dealer confidence is higher.

This is according to results from the latest WesBank Vehicle sales Confidence Indicator (WVsCI).
The WVsCI polled more than 250 new car dealerships throughout South Africa on issues such as current and expected sales activity, as well as factors affecting purchasing decisions among buyers.

The 0.2% drop in confidence from 6.5 to 6.3 represents a small and not unusual drop from the optimism shown by dealers at the beginning of the year, to slightly more realistic expectations one quarter later, says WesBank sales and marketing executive head Chris de Kock.
He says WesBank is still predicting overall growth in new vehicle sales of between 2% and 4% for 2013.

“Growth in new-vehicle sales is normalising, but remains robust considering the high base that was established over the past three years. Overall, dealer confidence remains high and we had a better-than- expected start to the year.”
De Kock notes that the local postcredit- crunch recovery in new-vehicle sales is now over, and the South African market is expected to return to a normal cycle.
According to the results of the second quarter WVsCI, dealers point to the launch of new models as the biggest single positive factor on future new-vehicle sales.

Forty-three per cent of dealers believe the introduction of new models will have the biggest impact on sales over the next three months, while 38% of dealers cite it as the main positive market influence for the next six months.
On the negative side, the indicator shows that volatility in the fuel price remains a major concern, with 23% of dealers citing this as the biggest negative now and over the next three to six months. Economic factors that continue to affect consumers’ personal finances also figure strongly.

“Fuel prices and the economy remain a big issue for dealers in terms of factors expected to affect sales. This has started to impact on the types of cars people are buying, leading consumers to buy down,” says De Kock.

“Looking at the WesBank book data, we see the replacement cycle still decreasing slightly on new cars, with the average transaction value increasing. Contrary to this, the average transaction value on used cars is actually decreasing.”

De Kock adds that the gap between new car prices and the comparable used car price is widening, which should ultimately result in customers finding better value in the used car market.
He says that the industry is performing well in general.

“Fundamentally, we believe the future outlook remains positive, although when looking at dealers’ expectations for future activity from now to six months, confidence is not increasing as much as it did in previous years.

“Other factors which we believe will impact on the industry later in the year include wage negotiations, as well as new car prices, which are set to increase more aggressively than over the past few years,” notes De Kock.