New vehicle sales ended the year largely in line with expectations despite the spate of industrial action towards the end of the year.
According to the National Association of Automobile Manufacturers of South Africa (Naamsa), new vehicle sales ended 2013 on 650 620 units, 3.2% ahead of 2012.
The growth is in line with WesBank’s prediction at the beginning of 2013 in contrast to some industry analysts who thought 6% or more may be possible.
“WesBank was more bearish with our 2013 forecast than many, but the depreciation of the Rand and instability during the last quarter as a result of industrial action contained the market more than many expected,” said Rudolf Mahoney, Head of Research at WesBank, one of South Arica’s leading asset-based financial solutions provider.
Light Commercial Vehicle (LCV) sales were instrumental to the overall market growth, up 5.7% on 2012 to 169 234 units. The biggest segment growth came from the Medium Commercial Vehicle (MCV) segment, which grew 14.8% but only contributed 11 595 units to the market. Passenger car sales were up 1.8% to 379 720 units.
The December market remained stable 0.2% ahead of December 2012, but 8.5% down on the previous month in line with traditional expectation as a result of purchase decision delays into the new year.
WesBank’s book indicated an increase in consumer demand year-on-year: numbers of applications increased 5% over 2012.
“The average transaction value is also on a strong upward trajectory with the average value of new car deals increasing 10.6% year-on-year from ZAR222 924 in December 2012 to ZAR246 536 in December 2013,” says Mahoney.
“In contract, the average used car transaction value has only increased by 5.9% during this period from ZAR157 372 to ZAR166 687.”
This provides a clear indication that affordability remains the singular driving factor in South African mobility. After years of stability in new vehicle prices, the depreciation of the Rand against major currencies has resulted in inevitable increases, making the pre-owned market more attractive in the process.
Average contract periods have remained consistent at 67 months for new vehicle deals, but increased marginally from 66 to 68 months on used vehicle deals. But the significant increase in demand for balloon payments (20% more accounts in December 2013 than December 2012) continues to show that customers are utilising the flexibility allowed within the finance agreement to combat affordability.
“Customers are also holding onto their vehicles for longer,” says Mahoney.
“The replacement cycle bottomed during May 2013 at 35 months, down from 45 months recorded in September 2010. Our average deal duration on new vehicles has increased to 37 months, up from 36 months in December 2012. Used vehicle replacement now comes up in 33 months on average compared to 31 months in December 2012.”
The automotive industry will be hoping for a much more stable year in 2014 in terms of the effects of industrial action, which should lead to better supply of new vehicle stock. However, the continued poor performance of the Rand will continue to force new vehicle and fuel price increases.
“We expect growth in new vehicle sales to be intrinsically linked to the performance of the economy during 2014,” says Mahoney.
“Consumers’ monthly mobility budgets will continue to come under pressure from these increases and associated administered costs such as e-Tolls, so we foresee that customers will continue to ‘buy down’ to more fuel efficient cars as well as shifting to the used vehicle market.”