Vehicle sales numbers surprise in September despite challenging economic environment

“Despite the surprisingly better than expected sales results for September, the fundamentals have not changed, the economic outlook is still not looking positive, the rand continues to weaken which will undoubtedly continue to drive above-inflation new car increases. As expected, the export market continues to outshine the rest of the industry and this trend will continue for the remainder of 2014.”

 

General Comments on September 2014 NAAMSA sales:

• The month of September 2014 experienced a 9.26% increase in sales compared to August 2014.


• Month on Month only Passenger (13.10%) and Light Commercial Vehicles (1.70%) experienced positive growth.


• Year on Year monthly comparison shows an increase of 11.51% in September 2014 compared to September 2013.


• Year to date (January – September 2014) comparisons shows that vehicle sales are down by -2.5% in the first 9 months of the year when compared to last year.


• Month on month Exports decreased in September (-6.7%) with Passenger vehicles increasing by 13.8% and Light Commercial Vehicles growing by 42.1%.


• Year on year monthly comparison shows an improvement in exports of 257.9% in September 2014 compared to September 2013.


• AMH & AAD saw an increase in September 2014, 6.3% month on month.

General Comments on September 2014 Standard Bank VAF Personal Applications:

• In September 2014 applications for new vehicles experienced negative month on month growth of -1.1% while applications for used vehicles had negative month on month growth of -2.9%.


• Year on year monthly comparison on applications shows a decline in both new (-34.0%) and used (-1.4%) vehicle market applications in September 2014 compared to September 2013.


• Applications in both Passenger Vehicles (-2.5%) and Light Commercial Vehicles (-2.3%) in the Personal market had negative month on month growth in September 2014.


•  Year on year monthly comparison shows positive growth for both Passenger Vehicles (0.8%) while Light Commercial Vehicles had negative growth (-3.1%) in September 2014.


• The proportion of applications with RV’s increased to 19.7% in September 2014 from 19.2% in August 2014. However, month on month applications with RV’s declined by 2.0%.


• The proportion of applications with deposits decreased to 33.3% in September 2014 from 39.2% in August 2014. Applications with deposits declined by -17.0% month on month.


• The Average Contract Term on applications increased from 67.0 months to 68.5 months (September 2013 to September 2014), year on year growth of 2.4%.


• The average application size increased from R189 755 in September 2013 to R209 865 in September 2014, a 10.6% year on year increase.

General Comments on September 2014 Standard Bank VAF Personal New Business:

• In September 2014 new business experienced negative month on month growth in new vehicle markets of -12.5% while the used vehicle markets had positive month on month growth of 9.1%.


• New business year on year comparisons shows a decline in both new (-34.3%) and used (-19.6%) vehicle markets in September 2014 compared to September 2013.


• Passenger vehicles had negative month on month growth of -11.5% while Light Commercial vehicles had negative growth of -4.2%.


•  Year on year monthly comparison shows a decline for both Passenger Vehicles (-15.5%) and Light Commercial Vehicles (-18.2%) in September 2014 compared to September 2013.


• The proportion of new business deals with deposits decreased to 43.3% in September 2014 from 45.5% in August 2014 (0.7% month on month decline and -44.1% year on year increase).


• The proportion of new business deals with RV’s stayed the same at 25.6% between August and September 2014. New business deals with RV’s declined month on month by -2.7% and -28.7% year on year.


• The Average Contract Term increased from 64.5 months in September 2013 to 66.2 months in September 2014 (2.7% year on year growth).


• The average deal size increased from R260 966 in September 2013 to R288 606 in September 2014, a 10.6% year on year increase.

General Comments on Standard Bank Personal VAF Book:

• Personal Market book shows new vehicle market decreased from 57.5% in September 2013 to 55.8% in September 2014, while used vehicle market increased from 42.5% in September 2013 to 44.2% in September 2014.


• Passenger Vehicles marginally increased from 89.2% in September 2013 to 88.7% in September 2014 while Light Commercial Vehicles increased from 10.3% in September 2013 to 10.8% in September 2014.

Nicholas Nkosi – Head of Standard Bank Vehicle and Asset Finance – Personal Markets

General Macro and Industry Comments:

• The SARB left the repo rate unchanged at 5.75% following its September MPC meeting. The outcome was in line with the industry’s forecast. According to Standard Bank this was based on the SARB’s revised forecasts for headline inflation.


• Headline annual inflation rate (CPI) in August 2014 was 6,4%.  This rate was 0.1 of a percentage point higher than the corresponding annual rate of 6.3% in July 2014. On average, prices increased by 0.4% between July 2014 and August 2014. Transport index increased by 0.4% between July 2014 and August 2014. The annual rate decreased to 6.1% in August 2014 from 6,9% in July 2014.


• The SARB expects headline CPI inflation to average 6.2% in 2014, falling to 5.7% in 2015 and 5.8% in 2016, as opposed to their forecast in July of 6.3%, 5.9% and 5.6% in the respective years. Inflation was revised lower due to lower expected food and petrol prices.


• The change in the SARB’s outlook for inflation is significant in that they no longer expect inflation to peak in Q4:14, and estimate that the peak has already happened, in Q2:14 at 6.5% y/y.


• In addition, the length of time that the SARB expects inflation to remain outside of the target band has shortened, they expect it will fall below 6.0% in Q1:15 as opposed to in Q2:15.


• Growth was also revised lower, from 1.7%, 2.9% and 3.2% y/y in 2014, 2015 and 2016 respectively to 1.5%, 2.8% and 3.1%. Standard Bank expects GDP for 2015 and 2016 to continue to disappoint to the downside. The SARB has lowered its growth forecast for 2014 successively at each of the last 6 meetings (starting from 3.3% at the September 2013 meeting).


• Fuel prices have risen by 0.5% in petrol (inland) and dropped by -3.2% in diesel (inland) since Jan 2014 to October 2014. Further, the price of fuel in the country has gone up by 28.8% in petrol and up by 21.2% in diesel since Jan 2012.


• The price of 93 Octane Petrol will be increasing by 2 cents from the 1^st of October 2014. The price of 95 Octane fuel will be decreasing by 5 cents while both grades of Diesel will see a drop of 13 cents.

Fuel Types

• In the month of August 2014, Petrol vehicle sales had negative month on month growth (-5.6%) while Diesel vehicle sales had positive month on month (1.0%).


• Year on Year August 2014 versus August 2013 Petrol vehicles declined by -2.1% while Diesel vehicles declined by -0.1%.


• Year on Year YTD comparison for 2014 shows that Petrol vehicle sales declined by -6.6% while Diesel vehicle sales increased by 0.2%.

Also view:

Vehicle Finance, Car Insurance and Road Safety

Buying and Selling a Vehicle – Informed decisions and the Vehicle Retailer

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Vehicle sales numbers surprise in September despite challenging economic environment

G20 host Australia faces challenging truths of multinational profit shifting

By Kerrie Sadiq, Queensland University of Technologies

The G20 Finance Ministers have the opportunity this weekend to endorse the initial suggestions of the OECD on how to address the international dilemma of multinational tax avoidance.

The work of the OECD on the problem to date is substantial. Most notable is the adoption by a lot of nations, such as Australia, of the Frequent Reporting Standard for the automatic exchange of tax information. This standard will allow important inroads to be made into tax avoidance, particularly by people sheltering money offshore. This is the 1st step in an ambitious tax reform plan.

There is a extended way to go if we are to end the concern now identified as Base Erosion and Profit Shifting (BEPS). This week’s release of the first of the OECD recommendations contains some positive signs that additional advances will be created. It also recognises some hard truths.

Transparency: a 3-pronged strategy

3 key OECD recommendations address international tax transparency: country-by-country reporting, harmful tax practices, and a multilateral instrument.

The most positive recommendation is county-by-country reporting, which will complement the information obtained through the Widespread Reporting Normal with the onus on the taxpayer to supply info to tax administrations. It will also extend the net of information captured to all multinationals.

A revamp of the OECD work on harmful tax practices is also welcome. This measure focuses on nations that engage in harmful tax competition. The OECD recommendations place an emphasis on enhanced transparency in relation to taxpayer rulings for individual taxpayers which relate to preferential regimes. Nevertheless, the focus will be on distinguishing between preferential regimes which encourage genuine activity and these which encourage profit shifting. The “spillover” effect, or the effect that one particular country’s selections have on other countries, highlighted lately by the IMF, is unlikely to be examined by the OECD.

Measures towards a multilateral instrument to expedite and streamline the implementation of BEPS measures are a constructive sign. Tangible outcomes rely on nations adopting G20 endorsed suggestions of the OECD. Success will only take place if a consensus framework is maintained. The recommended multilateral instrument is an administrative tool and, if employed successfully, will streamline processes and potentially express a nation’s in-principle commitment to tax reform.

Difficult truths

I have previously argued that the present international tax program is broken and it is going to take important international work to fix it.

Global effort demands to go beyond transparency. Most multinationals are not breaking the law. Morality aside, they are taking advantage of existing laws which enable profit shifting by means of tax advantaged structures. These structures allow the use of transfer pricing guidelines and treaty provisions to minimise tax, and lie at the heart of the problem. Whilst acknowledging the systemic challenges of making sure income are taxed exactly where economic activities occur and where the worth is produced, the first set of OECD recommendations understandably raise far more questions than answers.

The most telling is the report into the challenges of the digital economy which is the result of info and communication technologies. We are seeing rapidly evolving technologies and organization structures leading to troubles like a nation’s ability to establish the appropriate to tax transactions. The OECD and G20 countries have reached a widespread understanding of the challenges raised by the digital economy but leave a lot of the operate to the rest of the Action Program. Those suggestions are not due until 2015.

Far more progress has been made in relation to treaty abuse and particularly treaty buying. Tax treaties are entered into amongst 2 countries to determine taxing rights and avert double taxation. They are not intended to be employed to generate double non-taxation.

Currently, we are seeing multinationals acquiring positive aspects beneath treaties where they are a resident of neither country. It is positive to see that treaty anti abuse rules have been drafted and will be integrated in the OECD Model Tax Convention. Nonetheless, once more, far more work is required in this location.

Progress has also been made in the location of transfer pricing, but the majority of this work will form the basis of the 2015 suggestions.

Several of the BEPS issues are produced by the challenging truth that from a enterprise point of view multinationals structure their operations in a really international manner. However, from a tax viewpoint, we continue to treat the multinational entity as possessing separate parts. By treating a multinational as getting separate parts, they are in a position to shift income.

Despite recognising the systemic challenges, the OECD is committed to addressing flaws in the present regime. It is not taking into consideration other approaches such as “formulary apportionment” which is suggested by civil society groups and academics as becoming a achievable solution to the present separate entity method.

The suggestions reflect OECD and G20 countries consensus on a number of options to finish BEPS. Australian Treasurer Joe Hockey should endorse the OECD’s advised measures as a good step to address profit shifting and market the welfare of Australia’s citizens via a sound tax regime.

At the very same time, the Australian Parliament has the responsibility to legislate a resilient tax regime which is each robust and adaptable to the modern international economy. As host of the G20 in 2014 we must also been observed to be a leader in tax reform.

Kerrie Sadiq receives funding from the International Centre for Tax and Development. She is a Senior Adviser to the Tax Justice Ne2rk (UK).

This article was initially published on The Conversation.
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G20 host Australia faces challenging truths of multinational profit shifting