Car dealers confident despite risks

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IOL mot pic may23 Chevrolet Dealership

AFP

There was a high level of confidence among dealers in the month of January.

New vehicle dealers are extremely bullish about future sales activity despite the risk of a disruption to vehicle supplies from possible strikes during wage negotiations, and price increases caused by the depreciation of the rand.

The latest WesBank vehicle sales confidence indicator released on Wednesday revealed that confidence about sales activity among automotive dealers fell 0.2 points to 6.3 on a 10-point scale in the second quarter from 6.5 in the first.

However, the indicator revealed dealers’ confidence about sales activity in the next three months was at 6.8, rising to 7 over the next six months.

ALWAYS OPTIMISTIC

Chris de Kock, the executive head of sales and marketing at WesBank, said the current confidence of dealers in future sales activity levels was a bit unrealistic given the threat of higher new vehicle prices and strikes.

But he said dealers were always optimistic about future activity levels and not once since the indicator’s launch had they indicated they believed future sales activity levels would deteriorate.

Even in December 2007, at the height of the global financial crisis, when new vehicle sales were threatening to fall off a cliff, the confidence of dealers in future activity levels was at 5.4 for the next three months.

He said there were factors that kept future activity levels artificially high.

For instance, Mercedes-Benz dealers might find it hard to sell cars during the run-out phase of the current C-Class and ahead of the launch of the new C-Class later this year, but this was countered by BMW dealers, who had the fresh, new 3 Series.

But in six months, BMW dealers would face increased competition from Mercedes-Benz dealers, he said

De Kock attributed the decline in confidence between the first and second quarters to seasonality.

He said there was a high level of confidence among dealers in the month of January and the small and usual drop in optimism from the beginning of the year represented slightly more realistic expectations one quarter later.

BETTER THAN EXPECTED

De Kock said the market had a better-than-expected start to the year, although WesBank was still predicting an overall growth in new vehicle sales of between 2 percent and 4 percent for this calendar year.

“Growth in new vehicle sales is normalising but remains robust considering the high base that was established over the past three years,” he said.

Dealers surveyed pinpointed the launch of new models as the main positive factor that would have the greatest impact on new vehicle sales in the future.

FUEL PRICE A MAJOR CONCERN

On the negative side, the indicator revealed that volatility in the fuel price remained a major concern, with 23 percent of dealers citing this as the biggest issue currently and over the next three to six months.

Economic factors that affected consumers’ personal finances also figured strongly among the negative influences.

De Kock said fuel prices and the economy had started to have an effect on the types of cars people bought. Consumers had begun to buy down, he said.

The price gap between a new car and the comparable used car was widening, which would result in customers finding better value in the used car market. - Business Report


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