Japanese disaster dents growth in new car sales
NEW VEHICLE sales last month were held back by disruption to stock supplies caused by the March 11 earthquake and subsequent tsunami in Japan.
Nevertheless, figures released by the National Association of Automobile Manufacturers of SA (Naamsa) yesterday revealed that new car sales rose last month by 12 percent to 28 830 units from the 25 724 units sold in May last year.
Sales of light commercial vehicles (LCVs), bakkies and minibuses declined by almost 8 percent to 10 609 units from the 11 516 sold in May last year.
Year-to-date new car sales are 20.3 percent higher and LCV sales 6.5 percent higher than in the first five months of last year.
Nico Vermeulen, Naamsa’s executive director, said yesterday that the year-on-year growth in total industry new vehicle sales last month had declined substantially compared with earlier months.
Vermeulen confirmed that constraints on the availability of components from Japan had affected the production of certain product lines in South Africa.
Together with shortages of various models sourced from Japan, this would have contributed to the slowdown in the rate of growth in the new car and LCV sales cycle for the month, he said.
Vermeulen said it was anticipated that the supply position would normalise over the medium term.
Econometrix director Tony Twine, a motor industry analyst, said that last month’s new vehicle sales figures were difficult to interpret because of the possibility of supply-side interruptions perhaps masking demand-side softness.
Many analysts and commentators have been predicting lower new vehicle sales growth rates as the year progressed.
Twine said among the LCV model ranges, Japanese-linked one-ton pick-ups dominated but had declined year-on-year by almost 1 percent while car-derived pick-ups, a sizeable proportion of which originated in Europe, had grown by 15 percent.
“There are certainly examples of where the Japaneseexposed manufacturers are showing signs of stress.
“The pressure on Japanese supply lines is very important because the one-ton pick-up segment accounts for in excess of 50 percent of the LCV market,” he said.
Twine added that there had been a visible shift in the passenger market in April and last month away from entry-level vehicles towards popular cars.
This might indicate that household consumers, who became very evident in the car market in the fourth quarter of last year and first quarter of this year, might “be pulling in their horns and pulling customer dominance back to the business sector”, he said.
Sydney Soundy, the managing executive of Absa Vehicle and Asset Finance, attributed the negative growth in LCV sales to a combination of stock shortages and, possibly, the impact of economic conditions on small businesses.
However, Soundy said that in the year to date there had not been any significant change in the volume of vehicle finance applications it had received while its approval rate had improved significantly compared with last year and customers were opting for longer repayment terms.
Chris De Kock, WesBank’s executive head of sales and marketing, said its latest book figures showed a strong increase in monthly application volumes, with applications received last month increasing year on year by 9.7 percent to 86 900 requests.
De Kock said that application volumes so far this year had not differed a lot on a month-on-month basis but year-on-year application volumes were 34 percent higher and had increased by 27 percent in rand value.
Mike Glendinning, Volkswagen South Africa’s director of sales and marketing, said the slowing rate of growth in new car sales in April and last month had slightly reduced the market outlook for the year but it was anticipated that industry-wide new car sales would still grow by 15 percent to close to 400 000 units. AFRICA is an untapped opportunity for the automotive industry, but for the local industry to take advantage complex issues need to be resolved.
This is the view of Douglas Comrie, the chief facilitator of the Durban Automotive Cluster, who told the cluster’s annual general meeting yesterday that supplying vehicles to African countries “is anybody’s game from here onwards, but it is important that South Africa gets it right because we don’t have any other neighbours”.
Comrie said Thailand had been so successful because it supplied a regional market of 300 million people and not just its 50 million citizens. The South African industry could have access to almost 300 million people in the Southern African Development Community and 500 million if the Common Market for Eastern and Southern Africa was included.
But for local businesses to compete in other African markets imports of second-hand vehicles into these countries had to be prohibited. This would push up the cost of vehicles in these countries, meaning there was likely to be strong resistance and so the South African government needed to negotiate trade-offs.
Comrie said other obstacles were the different customs and trade regulations and distribution networks that were not as well developed as here.
Timothy Sturgeon, a senior research affiliate at the Industrial Performance Centre at the Massachusetts Institute of Technology and co-organiser of the Global Values Chain Initiative, said opportunities for the local industry included designing rugged vehicles suitable for African roads.
Justin Barnes, the chairman of B&M Analysts, said subSaharan Africa offered fantastic growth opportunities and the local component industry was well positioned to take advantage of this, but it could not think big unless it focused on cost and reliability.
Barnes said in a tough environment, with fierce competition, “opportunities will not come our way easily”. The component industry was “in a fractured position of having a lot of opportunity, but being very fragile”.
According to B&M Analysts’ Customer Benchmark Index, a new index that provides a snapshot of how domestic original equipment manufacturers perceive the local component industry, there is a sizeable gap between what they want and what they receive, particularly on price and reliability.
Barnes questioned whether the industry would achieve the government’s target of producing 1.2 million vehicles annually by 2020 with substantially more local content if prices of electricity, rates and water continued to rise at more than 15 percent a year, wages increased more than 8 percent and salaries of managers and technical staff rose by 10 percent. – Samantha Enslin-Payne