Local sales remain firm on backdrop of significantly weaker exports after August industrial action

But robust finance applications shows that consumer demand remains firm.

The South African automotive industry last month showed that, while there was an increase in finance applications, sales figures themselves were down slightly year on year. According to new vehicle sales figures released for last month by the National Association of Automobile Manufacturers of South Africa (NAAMSA), vehicle sales overall came in at 54 281 in September 2013 compared to 55 093 units in the same month last year, a drop of about 1.5%.

This is l due to the negative effect of the industrial action on stock levels. Sales of Light Commercial Vehicles, at 9.6% down year on year, were hardest hit. Surprisingly, Passenger vehicle sales were up  0.8% in the same period. At the same time, the market recorded a massive drop in exports of 75% year on year, from September 2012 to September 2013.

Cyril Zhungu, General Manager: Motor Division at WesBank, South Africa’s leading moveable asset-based financial solutions provider, says this was in line with WesBank’s expectations in the wake of last month’s strike action in the automotive industry. "This is a significant decrease in the export market and we have seen an almost immediate impact due to last month’s industrial action in the sector. We also anticipate the negative impact on exports to continue into October, however we are only starting to see the impact of the supply shortages on the local sales”

Zhungu says that despite these events, consumer demand for new cars remained robust. WesBank book data shows that the demand for vehicle finance remained strong in September, as reflected by the number of applications WesBank received. Year on year applications were up by 8 474, or 8.5%, from September 2012.

"Demand for finance was probably bolstered by pre-emptive buying in anticipation of possible stock shortages brought about by the industrial action, as well as by significant marketing activity from the manufacturers towards the end of the quarter.”

Zhungu says WesBank data shows that the Used:New ratio is also keeping steady on 1.22 and has been hovering at these levels for the past 14 months.

"However, because of supply shortages of new cars, the effect on prices brought about by the poor performance of the Rand, the price gap widening between new and used cars, as well as  a healthysupply of good quality used cars, more customers will start moving towards the used market over the coming months,” says Zhungu.

"Consumers are continuing to exercise the flexibility of the structure of the finance agreement. Average contract periods also remain on an upward trajectory with contract periods for used cars now longer than new cars. The demand for balloon payments has also increased by 20% since September 2012 and an increasing number of clients are also opting for bigger balloon payments with a year on year increase of 11% in the size of the balloon payments.”

"We anticipate that supply shortages will have more significant impact on local vehicles sales during October and WesBank remains firm in its view that the growth rate for new car sales will moderate down to 2.5% for 2013,” concludes Zhungu.