Entry level vehicles now a recessionary necessity
ASSOCIATED MOTOR HOLDINGS (AMH) has been the dark horse of the vehicle industry in South Africa. The distributor of Asian vehicles emerged from obscurity to record phenomenal sales growth levels over the past year, making it the darling of parent company Imperial’s stable. However, indications are AMH has reached its peak. The car industry’s old boys’ club has woken up to the reality of a post-recession consumer preference for smaller vehicles and launched a full-on attack into the entry-level segment.
“SA as a society is getting poorer,” says CEO Manny de Canha. “Around 40% of the cars sold in two to three years’ time will be entry level cars.” One of the biggest factors contributing to the trading downtrend is Government’s unrelenting drive to tax anything on wheels – starting from fuel levies and carbon taxes and ending with the still under-debate toll road tax in Gauteng, SA’s economic hub. Others looming on the horizon include a potential ring-fenced tax to upgrade the country’s oil refineries, as vaguely indicated in a report issued by Energy Minister Dipuo Peters last month.
Vehicle financing numbers reflect the trend. WesBank, one of SA’s biggest vehicle financiers, recently reported the numbers of cars financed increased by 47% in first quarter 2011 while the actual rand value of loans increased by just 25%.
AMH’s sales growth in 2010 was logicdefying. National Association of Automotive Manufacturers SA (Naamsa) figures show AMH and a few minor importers sold 58 049 passenger cars last year, 74% more than the previous year, with the Hyundai Getz and Kia Picanto among the winning models. AMH is housed in
Imperial’s distributorship division – the single biggest contributor to both revenue and profit in its 2010 financial year.
In the opposite corner of the ring, sales of SA-produced cars increased by 21% over that same period – still an achievement, given the fact the industry ground to a near standstill in 2008/2009. That was then: car manufacturers since have changed their tactics.
Volkswagen was first to the party, swiftly replacing its long-running City Golf model with the competitively priced Polo Vivo in February last year. At the Vivo’s launch to media, MD Dave Powel predicted the Vivo’s triumph over East Asian imports thanks to South Africans’ long-standing affinity with the VW brand. He was right. The Vivo has been repeatedly ranked number one in terms of passenger vehicle sales in Naamsa’s monthly figures.
“The entry level market is highly competitive and will become more competitive in the future,” says Bill Stephens, communications head at VW SA. “The Polo Vivo is the heartland of our brand in SA.”
Ford’s response was the Figo, an Indian built re-working of its second generation Fiesta, which was released into the SA market in third quarter 2010. This year will see the laggard – Toyota – enter the market with its Aygo, following a protracted absence since production of the Tazz ended in 2006. Likewise, Nissan will be releasing its new generation entry level Micra in May.
AMH isn’t too concerned. Not yet anyway. De Canha is confident the group will be able to maintain its fiercely fought-for corner in the expanding playing field. Growth, however, is a different story.
TOYOTA AYGO Enters the market this year