Another dismal month for car sales

For 2008 as a whole, new vehicle sales had fallen sharply on the back of substantially lower new car, light and medium commercial vehicle sales.

NAAMSA reported aggregate sales had declined by 123,757 units or 20.3% to 488,951 vehicles compared to the 612,708 units sold during 2007. This represented the lowest industry annual sales level since 2004.

Sales of new vehicles not reported in detail through NAAMSA added 44,376 units (2007: 63,390 units) to the 2008 figures comprising 34,198 cars and 10,178 light commercial vehicles. This effectively translates into a 2008 aggregate South African domestic new vehicle market of 533,327 vehicles - which represents a decline of 21.1%, in aggregate terms, compared to total industry sales of 676,098 units in 2007.

In sharp contrast, export sales had continued to perform exceptionally well which in turn had lent support to South African vehicle and component producers.

The South African automotive industry during 2008 had also been confronted with a severe profitability and viability crisis throughout the automotive value chain.

Pressure on automotive dealers and distributors had been particularly intense throughout 2008 resulting in a number of dealer closures.

Despite the recent welcome 0.5% interest rate cut as well as falling fuel prices, household debt remained high and financial institutions continued to exercise caution in extending credit to consumers.

Additionally, particularly during the second half of 2008, above average new vehicle price increases (in response to high input costs and a weak Rand) had served to undermine affordability.

Overall, industry trading conditions remained intensely competitive with margins under continued pressure. Corporate fleet replacement was also showing signs of weakness as businesses were confronted by a multiplicity of challenges and a slowing economy.

One area where there were signs of some momentum was in the used vehicle market which continued to offer value and provide some relief to the automotive retail and distributive trade.

NAAMSA says domestic production of motor vehicles during 2009 was expected to decline from 580,000 vehicles produced in 2008 to about 500,000 units.

It expects 2009 to be another challenging year for the South African automotive industry characterised by expected lower levels of production due to reduced demand in major export markets, modestly lower overall domestic sales, intense competition and continued pressure on margins and industry profitability.