Carmakers see sales growth in 2017

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Published Jan 17, 2017

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Johannesburg - South Africa's automotive

sector, the country's largest manufacturing industry, expects a

slight increase in new vehicles sales this year as economic

growth gains pace thanks to commodity price rises and a recovery

in farming.

New vehicle sales are expected to rise by 2.5 percent to 3.5

percent in 2017, Nico Vermeulen, director of the National

Association of Automobile Manufacturers of South Africa, told

Reuters.

The increase follows three successive years of decline and a

drop of 11.4 percent in 2016 to 547 442 units.

"As the economy starts to show signs of life and interest

rates remain stable for the foreseeable future, the market will

develop some traction in the second half of the year," Vermeulen

said.

He said the industry's sales growth projections were based

on an assumption of economic growth of over 1 percent this year

in Africa's most industrialised economy.

Last October South Africa's Treasury forecast growth of 0.5

percent in 2016, accelerating to 1.3 percent in 2017.

Read also:  New car sales: 'Encouraging' signs seen

The country is recovering from its worst drought in history

which wilted crops and stoked food inflation. Slower inflation

will help the economy this year along with higher commodity

prices, although worries about low investment rates and the

political environment continue to weigh.

Export success

Despite the recent decline in domestic new car sales,

exports have improved, hitting a record of 344,822 units in 2016

and are expected to rise to 375,000 units this year.

Most South African car manufacturing is of foreign models

made under licence.

Vermeulen said Europe would remain the key export market but

manufacturers were also closely watching developments in the

United States, where President-elect Donald Trump has vowed to

hit companies that shift production from America to other

countries with a 35 percent tax on their exports into the U.S.

"It's premature to speculate about what will happen. Our

reading of the situation is that President-elect Trump's

comments were directed at Mexico. I don't think he was directing

them at other countries," Vermeulen said.

He said South African manufacturers have benefited from the

African Growth and Opportunity Act (AGOA), a US trade

agreement designed to help African exporters, and duty-free

access to goods from sub-Saharan African countries.

"We need to allow the new US administration to settle in

and then clarify what their trade policy will be," Vermeulen

said.

"AGOA is a developmental programme intended to support

growth and development of African economies and I think if

that's the object, I hope that it will not be changed."

REUTERS

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