South Africa’s new vehicle sales are anticipated to hit a ceiling, with year-on-year growth of only 0.87% expected in 2015. WesBank shared its forecast for the performance of the motor industry in 2015, at the recent SAGMJ WesBank Car Of The Year banquet.
“Growth of passenger car sales seem to have hit a sort of artificial ceiling,” says Simphiwe Nghona, executive head of WesBank’s motor division. “Any increase from current levels will only be possible in an environment where the GDP of the country expands at much higher levels.”
Sales in the Light Commercial Vehicle (LCV) segment are expected to see the highest growth, at 3%, as consumers substitute passenger cars with LCVs and businesses replace their fleets. Medium and heavy commercial vehicles sales – although a smaller contributor – should improve marginally, at 1.1%.
The current high sales volumes in the passenger car segment were achieved with exponential growth during the post-recession recovery period. But this year passenger car sales levels, which are still respectably high, will remain unchanged compared to 2014. Additionally, the lack of growth in this large segment will limit the overall impact of positive sales prospects in LCV and other commercial vehicle segments.
Prevailing low interest rates continue to drive sales confidence for both consumers and dealers. Marketing incentives from manufacturers are also helping to drive sales – these include trade-in assistance and cash-back packages, both of which help cover the shortfall when consumers choose to trade in vehicles. And while overall household debt levels are still at high levels, the last 18 months have seen a consistent decline – a sign that consumers are experiencing an easing of pressure on their budgets.
However, depreciation of the Rand continues to have an obvious and direct effect on the vehicle sales. Last year new car price inflation exceeded CPI, and after a small reprieve fuel prices are on the rise again. The knock-on economic effects of a weaker currency will lead to higher living costs, ultimately affecting consumers’ budgets and how soon – if at all – they will be in the market for a new car.
Buyers who do find themselves in the car market may also opt for a pre-owned vehicle. The increasing shift to used is a result of consumers knowing they can get better value for their money if they forego the luxury of a new car.
“Overall, our vehicle sales forecast for 2015 is characterised by a market in which the positive and negative factors even out,” said Nghona. “Notwithstanding the low expectation of growth, sustaining activity at these levels in current economic conditions would be a positive.”
In 2014 WesBank forecast that passenger vehicle sales would decline 2%, with total industry sales down by 0.6%. With weak performances in April and May, and industry sales down by 5.2% at the end of the first half, it looked unlikely for that forecast to be achieved. But a strong sales recovery in the second half of the year realigned the market. Passenger car sales ended at -2.46%, while the industry total for 2014 ended down 0.74%.
Wesbank forecasts vehicle sales will remain flat in 2015
