South African motor manufacturers expect 2006 to be yet another year of buoyant economic circumstances and increasing prosperity for the country — in an environment that is likely to see the continuation of strong demand for new passenger cars during the coming year — after a record-breaking 2005.
Volkswagen of South Africa sales and marketing general manager Mike Glendinning said on Tuesday: “The all-time record performances can certainly be attributed to the generally buoyant economic conditions that prevailed during the year, as well as high levels of both business and consumer confidence in circumstances where new car pricing, for the majority of 2005, was declining in both real and nominal terms and where competitive circumstances in the market were driving a steady improvement in new-car affordability.
“The outlook for 2006 appears equally positive. For two years, the size of the new car market has grown at rates in excess of 20%. The market in 2004 was 22% up on the market in 2003, and 2005 has delivered market growth of 25% over 2004.
“While growth rates may slow somewhat, in the absence of any unexpected negative developments, 2006 looks set to deliver another year of buoyant economic circumstances and increasing prosperity for the country, an environment that is likely to promote the continuation of strong demand for new passenger cars during the coming year, after a record-breaking 2005,” he concluded.
Nissan’s director of marketing and sales, Roel de Vries, said trading conditions favoured the consumer in 2005 and this was reflected in the high sales achieved during the year.
“We have experienced a high level of business confidence during the past year and have seen extremely favourable trading conditions driving strong consumer demand, which in turn has fuelled strong economic growth.
“Interest rates are at their lowest in many years, vehicle prices have been virtually static and aggressive trading by the new-vehicle dealers has attracted growing numbers of buyers, particularly first-time buyers,” said De Vries.
“We expect similar conditions to prevail this year and, consequently, we see continued economic growth and consumer demand resulting in new record sales in 2006.”
According McCarthy Motor Holdings chairperson Brand Pretorius said a number of factors are prevailing in the South African economy that should have a positive impact on new-vehicle sales in 2006.
Pretorius said that estimated GDP growth of 4,5%, significantly higher government spending on infrastructural projects, and a stable rand and low inflation are expected to encourage the buying of new vehicles.
He added that black purchasing power is likely to accelerate even further, while new-vehicle sales should also be underpinned by high levels of consumer and business confidence.
“Vehicle manufacturers will continue to battle for market share as more and more players enter this already highly competitive market,” said Pretorius. “We also know that the scheduled implementation of the government’s taxi-recap programme should have a positive impact on sales, especially in the medium commercial vehicle segment.”
Pretorius is forecasting a 9,2% increase in overall vehicle sales (National Association of Automobile Manufacturers of South Africa and non-reporters included), which will take the market in 2006 to 675 000 units.
However, Pretorius noted that there are also a number of possible negative influences on the horizon that could dampen vehicle sales in 2006.
“Modest vehicle-price increases brought about by rand depreciation, the impact of local inflation, and substantial increases in the price of steel, plastics and paint could impact negatively on vehicle sales,” said Pretorius.
The agricultural sector is also affected by a severe drought at the moment and the car-allowance income-tax dispensation will become more punitive from March 1. These developments may affect sales negatively in those sectors.
Another worrisome aspect, according to Pretorius, is that reduced trade-in values are undermining new-vehicle affordability.
“Some dealers are unable to trade aggressively due to excessive and overvalued used-vehicle inventories, especially in the premium segment,” he said.
In terms of trade in value in the premium segment, a one-year-old vehicle retains only 64% of its retail selling price (RSP).
It obviously gets worse the longer an owner has the car, as a two-year-old car retains 54% of RSP, a three-year-old 46% of RSP, and a four-year-old vehicle only 39% of RSP, he added.
Because of new-vehicle price stability, depreciation trends have become more severe over the past few years. — I-Net Bridge