SA auto industry in for another bumpy year - Naamsa

Cape Town - South Africa's domestic auto industry can expect another difficult year in 2017, the National Association of Automobile Manufacturers of SA (Naamsa) said on Monday.

However, it expects a modest improvement in new vehicle sales during the second half of 2017. Industry production levels, on the back of expected further growth in vehicle exports, should remain in an upward phase, in its view.

Overall, 2016 was an extremely difficult year for the SA automotive industry. Domestic new vehicle sales were progressively under pressure and recorded a year-on-year (y/y) decline for the third year in succession, according to Naamsa.

Challenges for the industry included the slowdown in the domestic economy, above average new vehicle inflationary pressures, increases in interest rates, pressure on consumers’ and household disposable income and low levels of consumer confidence. These contributed to a double digit decline in annual domestic sales volumes, according to Naamsa.

Aggregate sales during 2016 fell by 11.4% in volume terms to 547 442 units compared to the sales total of 617 648 in 2015.

December sales

Vehicle sales in SA ended 2016 on a weak note with aggregate industry new vehicle sales for December 15.3% (7 519 vehicles) down compared to December 2015, explained Naamsa.  

In December 2016 the y/y volume change of sales of new passenger cars was down 14%, that of light commercial vehicles was down 17.8% and sales of sales of medium and heavy commercial vehicles declined by 18.2%.

Pressure was particularly clear at dealer level, despite attractive sales incentives and a strong contribution by the car rental sector which accounted for an estimated 16.3% of new car sales during the year, according to Naamsa.

"Industry trading conditions had remained intensely competitive, characterised by pressure on dealer margins," it said.

Preliminary estimates of 2016 motor industry new vehicle related sales turnover indicated a decline of about 2%. This takes account of sales volumes, changes in mix and a weighted average estimated increase of about 14% in new vehicle prices to reach about R233bn for the year.

READ: New car sales under pressure despite incentives

Export sales

By contrast, export sales recorded an improvement in December, up 7% (18 668 units) compared to exports in December 2015. Industry new vehicle export sales were estimated to have added a further R105bn to total industry 2016 revenue.  

The 2016 vehicle exports represented the highest annual industry export figure on record. Total vehicle exports at 344 822 units were up on the 333 847 vehicles exported in 2015.

"Assuming further improvement in the global economy, industry export sales during 2017 could improve by some 30 000 vehicles or about 10% to reach a conservative projection of 375 000 export units," said Naamsa.

"The decline in domestic sales was, therefore, offset to a limited extent by continued growth in vehicle exports which, in turn, assisted in sustaining utilisation capacities and employment levels of vehicle manufacturers."

Prospects for 2017

The general expectation in the industry is that domestic new vehicle sales would remain fairly flat going into 2017.

Naamsa, said it remained hopeful, however, that on the back of the expected improvement in key economic indicators, domestic sales would regain some traction in the second half of 2017 with y/y growth perhaps settling in the 2.5% to 3.5% range and hold to around that level going forward.

"Factoring in the expected improvement in exports, domestic production of motor vehicles in SA is expected to show an increase from 604 000 vehicles produced in 2016 to close on 641 000 vehicles in 2017 – an improvement in vehicle production of about 6%," said Naamsa.

"This figure could prove conservative if vehicle exports expand more than currently anticipated. The projected higher vehicle production is consistent with the official vision for the industry to achieve an annual domestic vehicle production figure of close to 850 000 vehicles by 2020."

Future trends

Internationally and domestically, vehicle manufacturers would continue to focus on new models and products through sustained investment and new technologies, in Naamsa's view.  

"Technologies such as artificial intelligence could begin to reflect a tangible impact across sectors. Autonomous vehicles and driver assisted automatic systems as well as increased use of information technology in vehicles were likely to feature in the future," it said.

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