The positive growth experienced by the South African vehicle market in 2004 is set to continue in 2005, McCarthy Motor Holdings chairperson Brand Pretorius said on Thursday.
Pretorius expects the market to grow by approximately 11% this year.
“The macro-economic fundamentals are expected to remain positive in 2005 and all segments of the market, namely [the] fleet, car rental, government and private sectors, are poised to grow strongly,” Pretorius added.
“Significant economic growth, which is coinciding with enhanced vehicle affordability, is providing a healthy platform for further growth on top of the record sales attained last year. Vehicle sales are also being boosted by black South Africans’ quest for mobility,” he noted.
Annual new-vehicle sales have steadily increased over the past five years, recording sales of 360 248 units in 2002, 381 456 in 2003 and 480 879 in 2004 — which broke the previous record of 453,541 units set in 1981.
“An estimated growth in growth domestic product of 4% is expected for this year, and this, along with a strong rand, relatively low interest rates and the fact that business confidence is at an all-time high, will help to create a very positive environment for the local vehicle market.”
Pretorius said that enhanced vehicle affordability, driven by stable vehicle prices, decreasing interest rates and an increase in real terms of buyers’ disposable income, will also contribute to the growth.
In addition, he asserted that competitive trading conditions are expected to lead to a buyers’ market prevailing in 2005.
According to Pretorius, it is anticipated that higher governmental spending on infrastructural projects and rising private sector investments should also influence vehicle sales positively in 2005.
“Another driving force of the projected increase in vehicle sales in 2005 could be the fact that many people may consider the replacement of their ageing vehicles,” Pretorius said.
“More than 49% of the South African vehicle population is older than 10 years, while another 16% is older than 20 years.”
Negative influences
But he warned that there could also be some negative influences on sales in 2005, such as possible vehicle price increases.
“These increases could be brought about by the impact of local inflation on manufacturers, as well as the substantial increases in steel prices,” said Pretorius.
He pointed out that vehicle sales in the agricultural sector may also decline because of the current drought that has hit a number of regions.
“In addition, the combined impact of new vehicle price deflation and the abundance of special offers has led to a slowdown in used vehicle sales in 2004,” Pretorius added.
“This shift from used to new vehicles has given rise to a significant decline in trade-in values, and a build-up of excessive used-vehicle inventories at dealer levels. This is undermining dealers’ ability to offer attractive trade-in values.”
It is expected that black purchasing power will accelerate even further in 2005 and have a significant impact on the year’s vehicle sales.
Vehicle ownership in South Africa currently stands at 13% of the total population, with 8% of black South Africans owning a vehicle, and 85% of whites, according to McCarthy.
“The ratio shifts somewhat when one looks at the comparable numbers per household, with blacks at 35% and whites at 93%.”
Similar statistics for other developing countries indicate that South Africans are reasonably mobile.
In Indonesia, vehicle ownership by individuals stands at 2,9%, Thailand at 7,1% and Malaysia at 14,3%.
“If we look at vehicles per 1 000 people of the population, South Africa stands at 132, edging just above the world average of 130,” Pretorius said.
“China has 12 vehicles per 1 000 people, Europe 380 and the United States 800. From these statistics, it is clear that the local market has substantial potential for further growth. The continuation of sustainable economic growth, increased income levels and the continuous enhancement of vehicle affordability will unlock this potential,” he concluded.
McCarthy is looking to reach a sales target of 75 000 new and used vehicles for the financial year ending June 30.
“Major initiatives include the possible acquisition of a commercial vehicle distributorship, the further expansion of the McCarthy pre-owned network and the selective expansion of the company’s franchise portfolio,” said Pretorius.
“Some major dealer network developments are also in the pipeline, with state-of-the-art DaimlerChrysler lifestyle centres planned in Pretoria, and the development of mega-sized outlets for our Toyota, Nissan and VW [Volkswagen] franchises,” he added. — I-Net Bridge