The South African automotive industry has recorded a strong first half with a total increase in new vehicle sales of 10.46% for the six months to June 2012 compared with the same period a year earlier.
Chris De Kock, Executive Head of Sales and Marketing at WesBank, South Africa’s leading moveable asset-based financial solutions provider, notes that this is somewhat slower than the 15.83% achieved in the first half of 2011. “The decline in the rate of growth is to be expected after the very strong performance last year; however, double digit growth is still very positive given that we are coming off such a high base.”
De Kock says the growth in new vehicle sales continues to be driven by consumer demand. “The passenger market remains the best performing segment with year-on-year growth of 11.77% in the first half. Conversely, the weakest growth has been in Heavy Commercial Vehicles (HCVs) and Extra Heavy Commercial Vehicles (EHCVs) which increased by just 0.98% and 6.33% respectively.”
“This lower rate of growth in the commercial market can be explained by the very strong growth in the Heavy Commercial segment of the market last year, as businesses took advantage of promotional offers to replace these vehicles, with growth in the HCV and EHCV market of 17.09% and 50.19% respectively in the first half of 2011.
He says the ongoing low interest rate environment, new models being introduced into the market and the small price gap between new and used vehicles, is continuing to support passenger sales. “However, while consumers are still buying we do expect the market to tighten in the second half of the year, as increasing financial pressures such as low wage increases and the impact of rising inflation weighs on consumers in the future.”
“In addition, global uncertainty is persisting and is unlikely to show any improvement in the near term, resulting in lower levels of business and impacting on consumer confidence for the remainder of the year.”
De Kock says WesBank data further supports the view that growth is decelerating, with a 8.5% increase in credit applications in the first half of 2012 compared with a 9.9% growth in applications achieved in the same period a year earlier.
“Much of the pent-up demand for passenger vehicles has been met in the last couple of years and the average replacement cycle has already reduced to just 39 months on new cars and 32 on used. We believe the replacement cycle is close to its peak and therefore continue to maintain our forecast for single digit growth throughout the current year for passenger vehicles,” says De Kock.
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