Absa Commentary: October 2015 NAAMSA Sales Report New Vehicle Sales and Exports

Vehicle Sales and Exports

 

• A total of 54 244 new vehicles were sold in October 2015, which were 1 071 units and 1.9% less than total sales in September. Sales volumes were down by 5 091 units in October from the same month last year, resulting in a decline of 8.6% year-on-year (y/y). Year-to-date sales were down by 4.5% to more than 517 000 units compared with the first ten months of last year.
• Of total industry sales of 54 244 units in October, 80.9% represented dealer sales, 12.2% represented sales to the vehicle rental industry, 3.5% of sales were to corporate fleets and 3.4% represented sales to the government.
• Passenger vehicles sales of 36 175 units (66.7% of total vehicle sales) were recorded in October, which were 10.9% less than October last year and 3% less than in September this year. Commercial vehicle sales were down by 3.5% y/y in October, with light commercial vehicles sales (28% of total vehicle sales) declining by 4.1% y/y, but rising by a negligible 0.4% month-on-month (m/m) to 15 171 units.
• The overall daily sales rate dropped to 2 466 units in October from 2 634 units in September.
• New vehicle exports showed a significant drop of 13.9% y/y and 21.1% m/m to a total of 27 732 units in October. This was mainly the result of a sharp drop of 61.5% y/y in the exports of light commercial vehicles, which were related to exports of Ford Ranger LCVs being significantly lower due to a new model replacement. Year-to-date export volumes were up by 27% y/y to a total of more than 288 000 units.

 

Vehicle Finance

• Vehicles are currently mostly financed over a 72-month period with used vehicles only marginally impacting the average financing term. The main driver of this remains affordability, but it has the downside of an ever-increasing average contract period, which continues to lengthen the vehicle replacement cycle.
• The ratio of used to new cars financed was 1.54 at the end of September this year. A total of 32 587 used vehicles were financed in September, with the number of new vehicles financed at 21 099. The total number of vehicles financed in the first nine months of the year came to 351 229, of which 223 064 were used and 128 165 were new, with a used-to-new ratio of 1.74 over this period compared with a ratio of 1.66 in January to September last year.
• Comments and statistics on applications received and electronically scored by Absa in October:
• We experienced a decrease in the number of applications received and a decrease in the approval rate.
• Applications received and scored with a 72 month finance term = 90%
• Applications received and scored with balloon payments = 30%

 

Industry Outlook

• Against the background of new vehicle sales contracting in the first ten months of the year, sales volumes are set to be lower for the full year compared with 2014. The key factors driving vehicle sales are economic growth, inflation, interest rates, household and business financial conditions, and levels of confidence.
• Entry-level passenger cars, new model releases and manufacturer incentives will continue to be the main contributors to new vehicle sales volumes for the rest of the year.
• New vehicle exports are to show relatively strong growth in 2015, impacted by world economic growth that drive the demand for vehicles, local manufacturers’ export programs and an expected weaker rand exchange rate towards the end of the year, which will give further support to vehicle export competitiveness.
• Interest rates are forecast to rise further over the next 12 months, which affect the affordability of and demand for vehicle finance.

 

Consumer Outlook

• Consumers are to continue to experience a fair amount of financial strain towards year-end and in 2016 as a result of inflationary pressures and rising interest rates. Credit-risk profiles will most probably stay under pressure and are to remain a key factor in the accessibility of and the demand for and growth in credit, including vehicle finance. In view of a persistent severe lack of sufficient savings, access to credit, together with the aspect of consumer confidence, will be key factors in the vehicle market.
• Consumers are still finding it difficult to obtain and afford credit for higher-priced vehicles, with the demand for favourably priced entry-level vehicles and good-quality used vehicles remaining strong.

 

Factors Impacting the Vehicle Sector

• Vehicle prices (exchange rate, taxes, input costs): New vehicle price inflation may remain under upward pressure due to expected further rand weakness towards the end of the year and in 2016.
• Household finances (household income, employment, inflation, ratio of household debt to disposable income and consumer credit-risk profiles), business sector performance and consumer and business confidence: Household finances remain finely balanced with debt levels still high and the percentage of credit-active consumers having impaired credit records remaining on a gradual rising trend. Consumer and business confidence remains low.
• Vehicle finance (interest rates, banks’ risk appetite and lending criteria, legislation and regulation): The demand for and affordability and accessibility of vehicle finance, largely driven by interest rate movements, customer credit-risk profiles and consumer and business confidence, will remain important to the performance of vehicle sales.
• Transport costs (fuel prices and maintenance costs): Fuel prices and vehicle maintenance costs drive transport costs and consumer price inflation, impacting consumer and business spending power.
• Economic performance and vehicle demand and supply (global and domestic economic growth, exports and workforce stability): Global and domestic economic growth will drive domestic vehicle sales and exports, which will be supported by manufacturers’ export programs, with labour market trends and developments impacting vehicle production and export volumes. Vehicle export competitiveness will benefit from a depreciating exchange rate.

Also view:

Vehicle Finance, Car Insurance and Road Safety

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