Growth in vehicle sales continue to rise in May 2013

Demand for new vehicle sales rose by 7.5% year on year in May 2013, according to figures released by the National Association of Automobile Manufacturers of South Africa (NAAMSA), which showed an increase in total industry vehicles sales to 53 997. Most notably Light Commercial Vehicles are outperforming the industry and recorded sales growth of 11.1% comparing month on month, and 12.2% for the year to date sales. Passenger vehicles remained robust with sales growth of 6.3% compared to May 2012 and 5.9% growth compared to the same period January to May 2012.

According to Chris De Kock, Executive Head of Sales and Marketing at WesBank, South Africa’s leading asset-based financial solutions provider, year-to-date new vehicle sales remain in line with WesBank’s expectations.

De Kock says the industry’s figures are echoed by WesBank book data, which shows that applications grew by 4.6% year on year, and from a year to date perspective, applications are up 6.9% compared to the same period last year. “This indicates that there is robust demand to replace cars. The replacement cycle seems to be reaching the bottom of the cycle, at about 36 months.”

Commenting on new car prices, De Kock clarified, “The average transaction value for new cars increased from R203 000 in May 2011 to R207 000 (2.3%) in May 2012, and then we saw a comparative jump to R232 000 (12.8%) in May 2013, indicating that manufacturers are increasing new car prices more aggressively this year than last year.”

WesBank data shows that the Used:New car ratio has also bottomed at 1.20 and has been trading in this narrow band for the past 6 months. “The gap between new and used cars are whidening further. We anticipate that because of this the Used:New ratio should slowly start moving in favour of Used cars later on this year,” comments De Kock.

In addition, says De Kock, the average finance contract period has been on a constant upward trajectory for both new and used cars. “This indicates that customers are opting for longer contract periods in order to manage the affordability of their monthly instalments.”

“While we see the market continuing to flatten, with relatively muted sales growth for the rest of the year, we still predict a growth in the new car market of 2.4% this year and it remains a positive result, as the industry is continuing to grow off the past three year’s very high base. This equates to a healthy industry in South Africa and a significant contributor to the economy overall,” concludes De Kock.

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