Smaller cars sell better as market slows down

2011-07-05 00:00

THE resurgence in demand for new vehicles from the corporate sector lifted the overall new vehicle sales market to a higher level of growth in June 2011 compared with the previous month.

However, it is clear that new vehicle dealerships will experience lower growth in 2011 compared with the strong recovery posted last year.

The latest National Association of Automobile Manufacturers of South Africa (Naamsa) figures, released yesterday, show that new vehicle sales in June 2011 were 12,6% higher year on year.

However, although the market posted higher growth in June compared with prior months, the market experienced a slowdown the second quarter of the year.

The growth in sales for the first quarter of 2011 came in at 30% year on year compared with 9,4% in the second quarter of 2011.

Chris de Kock, executive head of sales and marketing at asset financier WesBank told The Witness yesterday that he expects sales growth of about 10% this year on the back of weaker consumer demand.

“Consumers, which make up about two-thirds of the market, are definitely under pressure.

“The pent-up demand we saw last year is abating. The short-term outlook is benign. Consumers have had to deal with price hikes in electricity, fuel and other products and services. They also face an uncertain economic outlook,” De Kock said.

One positive sign emerging out of the data is the resurgence of the corporate market.

New vehicle sales to corporates grew 30% year on year and 15% month on month in June.

De Kock said there are signs that corporates are emerging from their slumber, adding that they have begun to invest in assets.

He said WesBank is now issuing about R1 billion worth of vehicle and other loans every month.

Nedbank’s group economic unit said “sales of heavy commercial vehicles reached their highest levels since November 2008, rising by 49,2% year on year, further evidence that fixed investment spending is picking up, albeit gradually”.

Standard Bank economist Shireen Darmalingam said that real new vehicle prices, which have been declining over the past 13 months, will provide some stimulus for sales volumes in the remainder of 2011.

Dr Johan van Zyl, president and CEO of Toyota South Africa Motors, said the entry level market now constitutes 45% of the total passenger vehicle market.

He expects the entry segment to continue growing as more people purchase smaller vehicles following the economic downturn of 2008.

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