The August new vehicle sales figures released by the National Association of Automobile Manufacturers (Naamsa) have offered a mixed bag of good and bad news for the industry. Although sales of passenger vehicles for the month were down 21.1% year on year, the number was marginally up by 1.6% on July. Most encouraging though, is the fact that the rate of sales per business day was up by nearly 10% compared to last month, representing the second highest rate recorded in 2009.
According to Chris de Kock, Executive Head Sales and Marketing WesBank their book reveals a similar mix of good and bad news. “While our new business numbers is a reflection of the overall market’s performance, application volumes continue to show a steady, albeit unspectacular, upward trend. Our approval rates have remained unchanged, despite consumers’ efforts to improve their own personal balance sheets after the tough cycle we’ve just been through” said de Kock.
Historical trends reveal that it normally takes 6 to 9 months before interest rate reductions have a material influence on new vehicle sales. If history is to repeat itself, the market should see the benefits of the Monetary Policy Committee’s aggressive rate cuts this year within the next month or two. However, there are worrying factors that may be responsible for delaying this effect. “We are concerned that the extended terms over which consumers choose to finance their cars is having a marked negative impact on new sales. With more than 80% of finance agreements now being done over 60 months and more, we are undoubtedly seeing it take effect on the average new car replacement cycle,” continues de Kock. In August 2009, WesBank saw this measure move out to nearly 41 months, the highest number in its recorded history.
Looking at the Naamsa figures for commercial vehicles, it is evident that South African businesses, particularly those operating in the transport and logistics sector are still under severe pressure. With light commercial vehicle sales down 22% year on year and trucks in total down almost 51%, the numbers aren’t looking healthy. “We have a number of transport operators that have approached us for assistance and we have given them guidance and advice to weather the storm. In instances where transport operators have financed every single truck in their fleet and have very little other equity in the business, it becomes quite difficult. But certainly, we are trying to assist as much as we can,” concludes de Kock.
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