Carbon tax could inhibit car sales

The tax that comes into effect on 1 September, will range from 0.6% to 4.1%, depending on how much carbon dioxide the vehicle emits.

WesBank, a division of FirstRand, said the impending carbon tax "could possibly inhibit future" vehicle sales activity.

Future outlook stable

Releasing its latest quarterly vehicle sales confidence indicator, WesBank said the future market outlook remained at more stable levels, with the six-month (7.1) and 12-month (7.2) activity projections still unable to pierce the ceiling level of 7.2.

On a scale of 1-10 - 1 being the lower and 10 being the higher 7.2 indicates that dealers expect a likely increase in new vehicle sales.

The WesBank's quarterly confidence indicator surveys car dealers to gauge confidence in the vehicle market and provide a predictive outlook on activity.

For the remainder of 2010 and the first half of 2011, WesBank said it expected vehicle sales growth to continue, but at a potentially slower pace.

Tax will raise car prices

Chris de Kock, the executive head of sales and marketing at WesBank, said the new tax will make new cars more expensive.

De Kock said car manufacturers might pass on the tax to consumers.

The tax may encourage consumers to buy down or purchase cheaper cars that emit less CO2, De Kock said.

But the National Treasury said vehicle sales had already started to pick up as the economy recovered.

An estimated 2% to 3% price increase in some vehicles will not stop people from buying vehicles, it said.

The National Association of Automobile Manufacturers of South Africa (Naamsa) has said that the new tax added cost to consumers.

Based on current sales volumes, the incremental tax burden amounted to about R1.6 billion per annum in respect of new passenger cars and would probably add a further R800 million additional taxes in respect of light commercial vehicles.

"There was no doubt that an increase in the tax burden of around R2.5 billion would depress sales volumes and production with negative implications for employment levels in the vehicle and component manufacturing industries," the association warned.

Confidence positive

In its latest vehicle sales confidence indicator released on Wednesday, WesBank said confidence levels in new vehicle sales remained positive.

It said the overall confidence levels showed a marginal improvement, rising to 5.9 for the quarter to July 2010 from 5.8 in the previous quarter to April 2010.

The positive outlook among dealers was confirmed by the better-than-expected new passenger vehicle sales.

New vehicle sales grew 20% to 41,367 year-on-year in July from 34,472 in the corresponding period in 2009, according to Naamsa.

Increase in finance applications

WesBank said its book continued to support further growth in volume and quality of vehicle finance applications received.

On a year-to-date basis, finance applications received for new vehicles have increase by 27%, while finance demand for used vehicles only grew by 16%.

This explains why WesBank's new-to-used ratio has retreated from a level of 2.3 used vehicles for every new vehicle financed to 1.6 over the past year.

First-time approval rates have increased by 12% over the same period last year, the bank said.

WesBank said a large number of clients who had previously paid off their vehicles without selling them are now entering the new vehicle market.

"We have also seen a reversal in the buying-down behaviour which was the norm 18 months ago, with a growing percentage of customers now starting to buy up from a used vehicle into a new vehicle," it said.