Rubbing salt in the wound is sustained pressure on household income, increasingly slow economic growth, and subdued consumer confidence.
Last year's seven-week strike, which has been estimated to have cost the industry R20bn, will not have helped either.
David Smith, managing director of long-term car leasing company Ariva says companies and individuals are facing the same issue this year, which is new vehicle price inflation. He expects new vehicle price inflation to be between 10% and 12%, largely due to the depreciation of the rand in recent months.
The weak exchange rate affects the price of imported vehicles, as well as the price of various components which manufacturers use.
The National Association of Automobile Manufacturers of SA (Naamsa) said while new vehicle sales showed growth last year - for the fourth successive year - domestic sales volumes were well below Naamsa's original estimates, mainly as a result of weak economic conditions and above inflation new vehicle price increases.
Total sales grew by only 3.2% in volume terms, compared with 24.7% growth in 2010, 16.1% in 2011 and 9% in 2012. Aggregate industry sales last year edged up to 650,620, while the forecast for this year is a slightly higher at 652,000.
While last year was SA's third-best on record for sales volumes, global vehicle sales breached 80m for the first time, with some major car manufacturers reporting record sales.
But Volkswagen Group SA director of sales and marketing Petra Hoffmann expects this year to be more difficult locally because of the deteriorating exchange rate, household income pressures and economic growth restraints.
"These will put pressure on the trading conditions and challenge all car companies," Hoffmann says.
Imperial Fleet Management's chief executive Nicholas De Canha says his company expects this year to be a bit tougher in terms of growth.
"Big price increases are expected to filter through to the market this year as a result of exchange rates," says De Canha.
He expects new vehicle price hikes to benefit leasing companies, which offer pegged rentals. He also expects a mild increase in the number of new leases this year, compared with only fractional growth in new vehicle sales.
The disparity between the record global sales last year and SA's more subdued growth can be largely explained by a rebounding US market and the substantial growth of the Chinese market. Besides the US and China, most countries had not shown significant growth.
Meanwhile, the long-term difficulty for the South African vehicle industry is the rate of job creation, which remains anaemic.
About 10% of taxpaying South Africans buy a car each year, which is already a high proportion in global terms and is unlikely to rise further.
De Canha says fuel price increases, e-tolls and new-car price inflation will see a number of would-be first time buyers excluded from the market.
But while the total new vehicle market would be relatively flat this year, he expects the leasing component to achieve 6% to 7% growth, with its share of the market expanding slightly.
However, it is not all doom for the local industry.
Mercedes-Benz SA's chief executive Martin Zimmermann said last October that his company would invest R3bn in producing the next generation C-Class in the country. The plan was likely to come to fruition this year.
Similarly, the Mumbai-based Mahindra Group's managing director Anand Mahindra said that he was encouraging Mahindra's various divisions to evaluate business opportunities on this continent.
Source: Business Day via I-Net Bridge
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