Motor industry ‘is in good financial health’

Roy Cokayne

The financial health of vehicle dealers, manufacturers and importers and financiers is the best it has been in about the past 10 years, according to WesBank.

WesBank chief executive Brian Riley said last week that dealer returns on operating assets were as good as they had been in the past decade, a state of financial health existed among most manufacturers and importers and the returns on capital investment by vehicle finance companies was also scaling heights not seen in over a decade.

WesBank funded the stock for the majority of dealers in South Africa and was most exposed to any deterioration in financial health but its provisions for dealer failure only reached R1 million last year, compared with R120m in 2009, Riley told the WesBank 2013 Car of the Year award function last week at which the Porsche Boxster was named the winner.

Riley said vehicle retailers had benefited from a sensible approach by the manufacturers, with new sites and points researched thoroughly and opened more selectively than in the booming 2005 to 2007 period.

Riley said WesBank did not have access to the income statements of all the manufacturers and importers but firmly believed a state of health existed among most.

The Automotive Production and Development Programme was now also established and created more certainty and support for the industry. “Exports were solid last year but are set for a quantum leap in 2013 as new markets open up in Africa, alongside the traditional European trading partners,” he said.

Riley said he did not hear too many complaints from any vehicle finance companies currently as returns on capital investments scaled heights not seen in more than a decade. He said all appeared to be harmonious on the surface but warned that it did not take much to disturb the millpond.

“Every player depends on scale as dealers, manufacturers, component parts distributors and finance companies have ploughed significant investment in fixed cost.

“Any reduction in the size of the cake will turn what is already a competitive market into a cut-throat one.”

The competition for dealer business was the strongest it had been in a number of years but none of the banks were taking the type of credit risks that preceded the introduction of the National Credit Act in 2007, and the battle for a share of the credit market was being fought only on two fronts: price and service.