Sharply rising fuel costs posed a significant threat to future new vehicle sales, WesBank warned yesterday.

The latest WesBank vehicle sales confidence indicator for the second quarter revealed that overall confidence levels in sales activity among dealers on a 10-point scale remained at the record high of 6.5 reached in January.

However, growing concerns were expressed over rising fuel costs, supply shortages and interest rates by the 250 dealers surveyed.

WesBank executive head of sales and marketing Chris de Kock said the price of fuel could soon reach “a tipping point for the industry”.

He said the average monthly fuel expense has risen 46 percent from R963.20 in 2007 to R1 412.60 this year, increasing the fuel portion of the total mobility basket from 24 percent in 2007 to 28 percent now.

The instalment of the base vehicle in the mobility basket increased 18 percent from R2 201 in 2007 to R2 609, largely because of the increase in the cash price of the base vehicle, while lower interest rates buffered the increase as well.

De Kock said 26.5 percent of dealers last month listed rising fuel prices as a negative factor, compared with 12.7 percent in January and 1.9 percent in October last year.

He said the earthquake in Japan had not yet had a marked impact on stock supply, but 8.2 percent of dealers cited stock supply as a factor likely to affect future sales activity, compared with 2.7 percent in January.

Better pricing and better value was cited as the key reason for the increased activity in the new vehicle market, with 56.2 percent of dealers last month describing the new vehicle market as “most active”, compared with 57.7 percent in January and 14.6 percent in October.

WesBank’s vehicle finance application approval rate had improved by 4 percentage points above 50 percent since January, De Kock added.

“We have been slightly more aggressive and tweaked our scorecard and the quality of applications has improved because the more conservative buyers are now entering the market,” he said.

However, the average value of finance contracts has continued to decline on new cars because of the buy-down trend to cheaper vehicles.

De Kock said new vehicle finance accounts at WesBank were up 40 percent in the first four months of this year, but the loan value was only 29 percent higher.

Repossession by the bank had been below 1 000 vehicles a month for the past six months, which was the “standard” level. - Business Report