PRETORIA – Wesbank, the vehicle finance division of FirstRand Bank, has forecast a 1 percent decline in total new vehicle sales this year compared to last year.
Its forecast contrasts with the 1 percent increase in total new vehicle sales to 558 000 units forecast by the National Association of Automobile Manufacturers of South Africa (Naamsa) for this year from the 552 190 units sales achieved last year.
Nico Vermeulen, the director of Naamsa, said yesterday that on reflection, most motor manufacturers expected new vehicle sales to be flat, particularly in the first half of the year.
However, Vermeulen said there was hope and expectation that a package of policy reforms after the general election would improve the prospects of an improvement in sales in the second half of the year.
WesBank released its forecast at the Cars.co.za Consumer Awards last night. It expects total sales of passenger car sales to decline this year by 1 percent and heavy truck and bus sales by 4.4 percent, while it was anticipated that light commercial vehicle sales would grow by 0.3 percent and medium commercial vehicle sales by 1.7 percent.
Ghana Msibi, the executive head of sales and marketing at WesBank, said its forecast was based on a number of core assumptions, including the muted macroeconomic outlook for the year ahead, its expectation of another 0.25 percentage point increase in interest rates in the year and the sentiment and propensity for consumers to make big-ticket purchases.
He said there were also cost-push factors that had to be taken into account at the current rand exchange rate, which together with the VAT hike and projected increases in electricity and food prices, would have a negative impact on the disposable income of consumers.
Msibi said possible positive influences on new vehicle sales included a slight increase in sales to the vehicle rental industry on the back of improved tourism activity and some increase in government spending if the post-general election government targeted delivery.
But Msibi said the South African economy was in a worse position now than a year ago when there was an improvement in confidence following the ANC’s elective conference.
He said business confidence and GDP forecasts were lower than a year ago, while interest rates were still under pressure from the volatility of the rand.
Msibi said WesBank expected consumers to delay purchases and buy down and move out of the passenger car premium market into the mainstream segments.
The compound annual growth in vehicle price inflation had been quite significant and would continue to put pressure on the premium car market segment, despite vehicle price inflation being lower than consumer price inflation.
“With the higher baseline pricing in those segments, the percentage increases translate into a significantly higher rand amount.
"When customers have to compare getting into a similar car, the price differential is massive.
“Customers will either go into the used segment or buy down based on what is available from competitors and what they would classify as money for value products,” he said.
Msibi added that based on manufacturers slashing their sales forecasts, WesBank was not expecting a continuation this year of the lucrative market incentives from manufacturers and dealers to aid sales.