Car exports 'to remain weak in 2010'
21 September 2009
South African vehicle exports will remain weak through 2010 due to limited international demand and a strong rand, though new vehicle sales will start picking up from mid-2010, TransUnion Auto Information Solutions CEO Mike von Hone predicts.
Von Hone was addressing a forum on the vehicle industry in Sandton, Johannesburg said on Friday.
Locally, although gross domestic product (GDP) growth was expected to turn positive next year, consumers were likely to remain conservative through 2010, Van Hone said.
This was due to "the continued weak borrowing capacity, uncertain economic outlook especially in relation to unemployment and the need to reduce personal debt levels".
He predicted that, based on current trends in the National Association of Automobile Manufacturers of SA sales figures, the overall rate of decline of the new car market would continue to slow through the remainder of 2009 and would end the year with sales of around 390 000 units – around 26 percent down on last year.
Some good news, however, was that the dealer consolidation process was largely complete, with dealers having rationalised costs by cutting staff and closing dealerships over the past 18 months.
Shift to used cars
In contrast, based on TransUnion's "computed used market" calculations, the overall used market was expected to reach around 600 000 units by the end of 2009, up almost 15 percent on last year, reflecting the strong relative shift in favour of used vehicles.
"Over the past 18 months TransUnion has seen the ratio of used vehicles financed to new vehicles financed move from 1.2 to one to 2.5 to one," Von Hone said.
"Despite this ratio having moderated slightly in the past three months, TransUnion expects the relative shift in demand from new to used cars to continue through the rest of this year and well into the second half of 2010."
He said it had been noticed that prices of used cars had started to firm over the past two to three months, with less oversupply and an increase in demand.
"This trend is likely to continue through at least the first half of 2010, with further margin improvement for dealers.
"Indeed, used cars will remain a significant profit opportunity for dealers through the rest of 2009 and into 2010," Von Hone said.
Change to come from mid-2010
He believed that change in the overall car market would likely be felt towards the middle of 2010, at which time the decline in new passenger vehicles sales would turn positive and start to gain momentum.
"In fact, TransUnion Auto is forecasting that the overall new car market will grow by some 10 percent in 2010, with gains in fleet and rental business reflecting in the first quarter."
This might be followed by higher private demand in the second half of the year, as consumers' financial positions improved and banks began to ease lending criteria to good customers.
Von Hone did not anticipate large increases in the number of new model derivatives in 2010, nor did he anticipate further significant price increases, "given the ongoing strength of the rand".
"However it is expected that the entry- and mid-level segments will likely remain hotly contested, as consumers will continue to be price-and value-conscious."
Sapa
