NAAMSA June New Vehicle Sales Report reveals increased pressure in vehicle market

General Comments on June 2014 NAAMSA sales:

  • The month of June 2014 experienced a 6.84% increase in sales compared to May 2014.
  • Month on Month all goods types experienced positive growth.
  • Year on Year monthly comparison shows a decrease of -2.31% in June 2014 compared to June 2013. The average sales per day in June 2014 were less than June 2013 (2,202 vs 2,254 with the same number of business days (24) in both months)
  • Year to date (January – June 2014) comparisons shows that vehicle sales are down by -5.30% in the first half of the year when compared to last year.
  • Month on month Exports increased significantly in June (54.05%) with Passenger vehicles being the main contributor (97.11%), although in comparison to June 2013, there was a decrease of -0.81% in exports experienced.
  • AMH & AAD saw a decrease in June 2014, -9.83%.

General Comments on June 2014 Standard Bank VAF New Business:

Total Market

  • In June 2014 new business in the Total market is down by -2.6% month on month in the new vehicle market while the used vehicle market increased by 0.7% month on month.
  • Year on year monthly comparison shows a decline in both new (-32.1%) and used (-43.9%) vehicle markets in June 2014 compared to June 2013.
  • Both Passenger Vehicles (-4.0%) and Light Commercial Vehicles (-0.4%) in the Total market had negative month on month growth in June 2014.
  • Year on year monthly comparison shows negative growth for both Passenger Vehicles (-47.8%) and Light Commercial Vehicles (-28.5%) in June 2014.
  • The proportion of new business deals with deposits increased to 49.3% in June 2014 from 47.0% in June 2013.
  • The proportion of new business deals with RV’s is also increasing, 31.0% in June 2014 compared to 27.7% in June 2013.
  • The Average Contract Term has decreased from 60.7 months to 57.2 months (June 2013 to June 2014).
  • The average deal size increased by 19.4% year on year in June 2014 compared to June 2013.

Personal Market

  • In June 2014 Personal new business experienced negative month on month growth in both new (-6.4%) and used (-5.4%) vehicle markets.
  • Personal new business year on year comparisons shows a decline in both new (-49.6%) and used (-53.2%) vehicle markets in June 2014 compared to June 2013.
  • Both Passenger Vehicles (-6.1%) and Light Commercial Vehicles (-6.9%) in the Personal market had negative month on month growth in June 2014.
  • Personal new business year on year monthly comparison shows a decline for both Passenger Vehicles (-52.5%) and Light Commercial Vehicles (-53.0%) in June 2014 compared to June 2013.
  • The proportion of new business deals with deposits increased to 42.7% in June 2014 from 40.9% in June 2013.
  • The number of deals with deposits decreased by -5.4% month on month in June 2014.
  • The proportion of new business deals with RV’s is also increasing, 53.2% in June 2014 compared to 39.4% in June 2013.
  • The number of deals with RV’s increased by 24.9% month on month in June 2014.
  • The Average Contract Term has decreased from 65.9 months to 65.5 months (June 2013 to June 2014).
  • The average deal size increased by 21.6% year on year in June 2014 compared to June 2013.
  • The average deal size increased to R296 115 in June 2014 from R285 860 in May 2014.

Business Market

  • In June 2014 Business market experienced negative month on month growth in the new (-2.8%) vehicle market. In contrast, the used vehicle market increased by 13.9% month on month.
  • Business market year on year comparisons shows a decline in both new (-12.0%) and used (-12.0%) vehicle markets in June 2014 compared to June 2013.
  • Both Passenger Vehicles (2.7%) and Light Commercial Vehicles (1.0%) in the Business market had positive month on month growth in June 2014.
  • Year on year monthly comparison shows both Passenger Vehicles (-27.5%) and Light Commercial Vehicles (-13.7%) in the Business market had negative growth in June 2014.
  • The proportion of new business deals with deposits decreased to 57.1% in June 2014 from 60.4% in June 2013.
  • The proportion of new business deals with RV’s increased to 11.4% in June 2014 compared to 5.7% in June 2013.
  • The Average Contract Term has decreased from 53.1 months to 50.2 months (June 2013 to June 2014).
  • The average deal size increased by 8.7% year on year in June 2014 compared to June 2013.

General Comments on Standard Bank VAF Book:

Total Market

  • Total Market, book comparison shows New:Used market split of 64%:36% as at June 2013 compared to 65%:34% as at June 2014.
  • Total Market on book as at June 2014 shows Passenger Vehicles (73%) and Light Commercial Vehicles (19%) are the biggest contributors.

Personal Market

  • In the Personal Market, book comparison shows New:Used market split of 56%:44% as at June 2013 compared to 57%:42% as at June 2014.
  • Personal Market on book as at June 2014 also shows Passenger Vehicles (89%) and Light Commercial Vehicles (10%) as the biggest contributors.

Business Market

  • Business Market, book comparison shows New:Used market split of 74%:26% as at June 2013 compared to 76%:24% as at June 2014.
  • Business Market on book as at June 2014 shows Passenger Vehicles (45%) and Light Commercial Vehicles (33%) as the biggest contributors. Heavy Commercial Vehicles make 8%, Extra Heavy Commercial makes 9% and Bus make the remaining 2%.

General Macro and Industry Comments:

  • The country’s Q1:14 Gross Domestic Product slowed to 1.6% y/y from 2.0% in Q4:13 and from 3.8% q/q in Q4:13 to 0.6% q/q in Q1:14. Standard Bank Research has revised its GDP forecast for 2014 to 2.0% down from 2.1%.
  • The MPC left the repo rate unchanged in the third week of May from the 0.50 bps rate hike in the beginning of the year (end January). Standard Bank research expect the report rate to remain unchanged given that the rand exchange rate does not fluctuate (weaken).
  • Headline annual inflation rate (CPI) increased from 6.1% y/y in April 2014 to 6.6% y/y in May 2014. On average, prices increased by 0.2% between April 2014 and May 2014. Transport index decreased by 0.1% of a percent point between April 2014 and May 2014, this was mainly due to a 15c per litre increase in petrol price. The annual rate increased to 8.9% in May 2014 from 6.8% in April 2014.
  • Fuel prices have risen by 5.4% in petrol (inland) and risen by 0.2% in Diesel (inland) since Jan 2012 to July 2014. Fuel prices have risen by 83.6% in petrol (inland) and risen by 87.1% in diesel (inland) since Jan 2010 to July 2014. Further, the price of fuel in the country has gone up by 289% in petrol and up by 413.3% in diesel since Jan 2001. Petrol price will increase by 29c per litre and diesel will increase by 14c per litre effective Wednesday 2nd July.
    • All of these factors are expected to hinder vehicle sales growth.

Fuel Types

  • In the month of May 2014, both Petrol (6.9%) and Diesel (8.7%) vehicle sales had positive month on month growth.
  • Year on year comparison for 2014 shows that Petrol vehicle sales declined by -2.5% while Diesel vehicle sales increased by 16.4% in May 2014 compared to May 2013.

NAAMSA Seasonality and Average Selling Days:

  • The average number of sales for June since 2010 has been 47,599 and the average number of sales for June since 2012 has been 53,141.
  • On average June has ranked the 9th best performing month in the last 4 years.
  • June 2014 had 24 selling days, with an average of 2,202 sales per day.
  • June 2013 had 24 selling days as well, with an average of 2,254 sales per day.
  • June 2014 has ranked 3rd best this year and 31st out of the 90 months since January 2007.

Savings

  • RV enables the customer to afford the vehicle because the monthly installment is reduced, however, at the end of the contract the customer must still pay the capital outstanding. The higher the RV percentage the lower the monthly installment and therefore the higher the customer saves on the monthly installment. The downside is the capital outstanding at the end of the contract. There are different options available to the customer at the end of the term. Customer can choose to refinance the RV (Outstanding balance) or sell the vehicle to finance the RV.
  • A deposit reduces the monthly installment enabling the customer to save on the installment amount and also the customer doesn’t owe any money at the end of the contract.

Market Insights

  • The performance of local and export sales in the first quarter were affected by last year’s seven week strike, while others changed over to new models which affected sales during the transition period.
  • Generally, there is a trend towards smaller more fuel efficient engines in commercial vehicles. The buying down trend continues in passenger vehicles, as consumers are looking for fuel efficiency and more powerful small engines in passenger cars. It could be that the small engines are still within the Middle market price range.
  • In addition, private vehicle buyers are increasing their repayment periods and opting for a balloon payment at the end of the repayment period due to increasing living costs.
  • Expectations of further interest rate hikes and the possibilities of more vehicle price increases reaffirms forecast of slight decline in vehicle sales for the year.
  • New vehicle price increases will probably positively impact on used car volumes due to the widening price gap between used and new vehicles.
  • New vehicle sales in the dealer space are also slowing down; dealers reporting that in many cases, although finance was approved customers did not conclude the deal.
  • There are various model introductions expected in the second half of the year and those already introduced in the first half of the year expected to boost sales.

Comments on NAAMSA New Vehicle Sales Report – June 2014:

Nicholas Nkosi – Head of Standard Bank Vehicle and Asset Finance – Personal Markets

Toni Fritz – Head of Standard Bank Vehicle and Asset Finance – Business Markets

Also view:

Vehicle Finance, Car Insurance and Road Safety

Buying and Selling a Vehicle – Informed decisions and the Vehicle Retailer

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