Dealers remain confident on car sales

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IOL mot nov22 kia lot . File photo: AFP

Strikes, civil unrest and concerns about the economy are making vehicle dealers nervous about the future prospects of the vehicle market, despite sales activity confidence among dealers remaining unchanged in the fourth quarter of this year.

The latest WesBank vehicle sales confidence indicator released yesterday revealed that 16 percent of dealers indicated that strikes and labour unrest would have a negative effect on future vehicle sales activity, while 11 percent cited political instability and elections as negative factors.

Chris De Kock, the executive head of sales and marketing at WesBank, said neither of these factors were highlighted in the previous quarter.

Overall confidence levels in sales activity among dealers remained unchanged at six out of 10 in the fourth quarter.

Confidence in future sales activity for the next three months was also unchanged from the previous quarter at 6.5 and at 6.7 for the next six months, compared with 6.8 in the previous quarter.

De Kock said the overwhelming input from dealers when they were interviewed was what was happening at that moment on their floor.

He said the perceptions of dealers about future sales activity levels reflected their nervousness about some negative factors, but this was being offset by the unbelievable value coming from manufacturers in the form of prices being maintained and warranty extensions that dealers could promote to customers.

PRICE SENSITIVITY

De Kock said the key factors that determined the demand for vehicles was the price and interest rates, but the recent weakness in the exchange rate of the rand had resulted in manufacturers increasing prices.

“Our view is that next year will be a tougher year for the industry,” he said.

The views of dealers about positive factors that would drive future sales activity were mixed, with 29 percent mentioning new products, 15 percent interest rates and 10 percent economic factors.

In regard to factors that prevent consumers from completing a purchase, 32 percent of dealers cited the economy and consumer confidence as the primary reason, compared with 9 percent previously.

De Kock said 12 percent of dealers said a low trade-in price was also a factor in preventing consumers from closing a deal on a new vehicle.

He said there had been growth in the used vehicle market in the fourth quarter, with 34 percent of dealers stating it was more active, compared with 25 percent in the previous quarter. This was the highest used vehicle percentage for two years.

De Kock said the new vehicle market was clearly still the most active but there had been a shift towards used vehicles.

He said demand for new vehicles had remained strong over the last few years, partly because of the small price gap between used and new vehicles and a shortage of late model used vehicles resulting from slow sales during 2007 to 2009.

However, De Kock said this was likely to change as more vehicles purchased during the start of the upward cycle came back into the market.

The indicator showed that consumers remained cost-conscious, with 15.9 percent of dealers citing pricing and 12.9 percent incentives and special deals as crucial reasons for new car sales.

De Kock admitted these percentages should have been higher, but suggested the reason they were not was because pricing and incentives had become the industry norm.



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