Motor industry set for best sales year

It looks like 2004 is going to be a bumper year for the South African motor industry — reflecting the strength of consumer and business spending at the moment, which is likely to continue.

The motor industry produced another excellent sales month in August, exceeding sales during the same month last year by 18,8%. Even more significant is the fact that August 2004 turned out to be the best August sales month to date.

A total of 41 150 new vehicles were sold against sales in August last year of 34 642 units. According to Brand Pretorius, chairperson of McCarthy Motor Holdings, growth in all major sectors of the market was once again outstanding.

On a year-to-date basis, total vehicle sales were up by 18,9% to 286 397 units, providing further evidence that the motor industry in all likelihood will experience its best sales year in more than 20 years.

According to Pretorius, the buoyant sales can mainly be attributed to higher levels of economic activity and the current high level of business and consumer confidence.

“Enhanced vehicle affordability and additional stimulation provided by major new product launches also contributed to the increase in vehicle sales.”

Passenger-car sales recorded a 21,6% increase over August 2003, ending the month on 27 926 units.

“Deliveries of new cars to the car-rental sector are healthy and historically sales to government and quasi-government sectors tend to peak in August,” said Pretorius. “As was the case in previous months, aggressive trading, as evidenced by the many incentives being offered to consumers, once again boosted the market.”

Turning to the commercial-vehicle segments, the light-commercial-vehicle market was also buoyant, recording an 11% increase on August 2003 to reach 11 266 unit sales.

Medium-commercial-vehicle sales were strong, with August sales totalling 855 units, an impressive 39,9% up on August 2003.

Heavy commercial vehicles also had a good month.

“At 1 103 units sold, the HCV sector was 21,1% up on August 2003. It recorded a meaningful 7,9% increase on July sales,” said Pretorius.

Pretorius points out that new vehicle prices have remained stable for the past 18 months.

“There is no doubt that, although vehicle list prices haven’t come down during this period, some value is being transferred to customers in the form of enhanced specification levels at no cost to them,” said Pretorius.

“Due to factors such as extended warrantees and service plans at no charge, as well as the reduced cost of financing resulting from a high incidence of subsidised interest rates and special discounts, the cost of vehicle ownership is being reduced.”

“From a retailer’s perspective, the only concerning development is the softening in demand for used vehicles,” added the McCarthy chairperson.

“Inventory levels are building up and trade-in prices are being adjusted downwards in order to effect alignment between stand-in values of dealers’ inventory and market-related prices.”

According to Pretorius, should this situation get any worse, the market’s ability to absorb more trade-ins will be undermined, which in turn could slow down new vehicle sales.

Interest-rate cut also helped

According to Nedbank, the latest motor vehicle statistics provide further evidence of the strength of consumer and business spending.

It said the numbers also provide the first clues on the response to the unexpected cut in interest rates on August 12.

“Although the 50 basis-point cut was small, it sent a clear message to consumers that the dangers of a rise in interest rates have receded and we expect strong spending to continue until this message changes. This is unlikely to happen in the short term, however, as the authorities will probably focus more on good news on the inflation front resulting from the rand’s strength,” Nedbank added.

It said motor vehicle sales are likely to remain strong in the remainder of 2004 as lower interest rates and good personal-income growth stimulate demand.

Record sales an ‘expectation’

According to Standard Bank, record sales in the passenger-car market are becoming almost a monthly expectation since the financial environment accommodates strong spending in the domestic market.

“It seems that just when we were anticipating an upward bias in interest rates, the Reserve Bank surprised the market with a 0,5% cut. The market had already been significantly boosted by previous income-tax cuts and a series of interest-rate cuts last year. Now consumers have further reason to consider taking on new debt.

“Although it is uncertain if the cut will encourage any new consumers to come into the market, the rate cut will certainly encourage potential buyers to bring their purchases forward. Thus 2004 is all set to be a bumper sales year for the motor-vehicle sector,” Standard Bank said. — I-Net Bridge

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