While 2012 has so far been a relatively good year for the South African automotive industry this trend is unlikely to be sustained through 2013, according to vehicle risk intelligence company TransUnion Auto Information Solutions.
This assertion was one of the key messages from Carel Martin, executive of sales at TransUnion Auto, who presented to motor and associated industry representatives attending the biannual TransUnion Auto Trends Forum at Melrose Arch in Johannesburg recently.
The good news was that new vehicle sales to date are some 10% up on 2011, the major dealer groups had experienced improved financial results on the back of higher sales volumes and continuing cost control, and increased business volumes whilst a decline in vehicle finance bad debt had also resulted in improved results for finance houses.
All is not rosy
"But all is not rosy as dealer confidence levels are decreasing when compared to those seen over the past 18 months," Martin said. "There is good reason for this as consumer debt continues to grow and reports indicate that households are experiencing further strain."
Other factors that may pressure the automotive industry include rising fuel prices, the introduction of toll fees for Gauteng drivers, and stabilised vehicle sales volumes. "Despite these challenges, it is important to understand that continued support programmes from manufacturers, coupled with low interest rates could potentially boost consumer credit demand," added Martin.
Taking all factors into account, including the fact that the low 2012 price increases, which contributed to the 2012 growth, are unlikely to be sustainable into 2013 as a result of the weakening Rand and higher input costs, TransUnion Auto's expectations for 2013 are less optimistic.
Countering large price discounts
Commenting on the outlook for the used car market, Martin predicted continued pressure for dealers. Dealers are continuing to sell used vehicles below the TransUnion Auto Dealers' Guide retail price in an attempt to counter the large new vehicle price discounts and incentives.
Martin questioned whether the current downward trajectory on used vehicle gross margins, which had been a feature of the market over the past two years, would continue. Margins appeared to have stabilised after the average percentage gap between trade and retail values reached its lowest level in the past four years in June 2012.
"Given the current market conditions, based on positive trends, constant supply and relative price stability seen in 2012, we can expect 2013 to deliver some growth, although it should be less than what we've seen in the past two years," Martin concluded.
LEGAL DISCLAIMER: This Message Board accepts no liability of legal consequences that arise from the Message Boards (e.g. defamation, slander, or other such crimes). All posted messages are the sole property of their respective authors. The maintainer does retain the right to remove any message posts for whatever reasons. People that post messages to this forum are not to libel/slander nor in any other way depict a company, entity, individual(s), or service in a false light; should they do so, the legal consequences are theirs alone. Bizcommunity.com will disclose authors' IP addresses to authorities if compelled to do so by a court of law.