Standard Bank Vehicle Sales December 2013







Published by Gerald Ferreira Date: January 7, 2014
Categories: General News

  • Standard Bank Comments on NAAMSA New Vehicle Sales Report - December 2013
  • Sydney Soundy – Head of Standard Bank Vehicle Asset Finance
  • Sales Performance Summary – Total by Market Segment (NAAMSA flash includes Namibia, Lesotho, Swaziland & Botswana)

standard bank

Sales Performance Summary – Total by Market Segment (NAAMSA flash includes Namibia, Lesotho, Swaziland & Botswana)

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Sales Performance Summary – Exports:

Vehicle-Sales-South-Africa

 

 

General Comments on December 2013 NAAMSA sales:

  • The month of December 2013 experienced -8.48% less sales than November 2013.
  • Month on Month all goods types experienced negative growth, with Passenger and Light Commercial Vehicles experiencing negative growth of -4.51% and -16.30% respectively.
  • Year on Year monthly comparison shows an increase of 0.20% in December 2013 compared to December of 2012. The average sales per day in December 2013 were more than December 2012 by 2,022 to 2,018.
  • Year to Date (January – December 2013) comparison indicates a growth of 3.17% in 2013 compared to 2012. This equates to 20,001 more vehicles sold in 2013 compared to last year (2012).
  • The main contributors to this year’s growth were Light Commercial, Medium Commercial and Extra Heavy Commercial Vehicles, with growth of 5.66%, 14.76% and 10.39% respectively. Year to Date growth for Passenger Vehicles was 1.77% and Heavy Commercial Vehicles experienced growth of 9.94%. Only Busses had negative growth - but this is on small volumes.
    • The average number of sales for December since 2010 has been 38,576 (excl December 2013) and on average December has ranked as the 9th best month since 2010. December 2013 has ranked 10th best performing month this year, only February and April had lower sales.
    • In 2013 the number of new vehicles reached 650,620 which is 3.17% up from 2012. The past year has ranked as the 3rd best year in terms of number of vehicles sold since 1994.
    • The highest number of new vehicle sales in a year was 702,610 (2006) and the lowest was 295,787 (1999). Relative to the highest and lowest recorded years, 2013 ended -51,990(-7.4%) less than 2006 and 295,787(120.0%) more than 1999.

General Macro and Industry Comments:

  • The country’s Quarter 3: 2013 Gross Domestic Product numbers came in at 0.7% q/q growth. This was on the back of a strong 3.2% q/q growth and is the lowest q/q growth since 2009.
  • Headline annual inflation rate (CPI) for all urban areas moderated more than consensus expectations, to 5.3% y/y in November 2013. This was down from October’s 5.5% y/y. On average, prices increased by 0.1% between October 2013 and November 2013. Lower petrol prices kept CPI contained in November (Petrol price was cut by 28c/l in the beginning of November).
  • With inflation moderating the SARB decided to leave the Repo rate unchanged in the last MPC meeting for the year. The Reserve Bank has given the indication that monetary tightening would be considered if there is significant depreciation of the Rand and rise in inflationary pressure.  It is expected that a 50bps increase will occur in 2014, although the timing is undecided, with some economists predicting that this will be around the second quarter of the year.

 

  • The ratio of declined credit applications increased in Quarter 2: 2013 to 56.14% from 55.65% in Quarter 1: 2013 according to the NCR. Consumer creditworthiness is on a slippery slope with 48% of credit active consumers now having impaired credit records as at Quarter 3: 2013. This reflects an increase of 1.1% year on year.
  • Private Sector Credit Extension (PSCE) growth slowed to 6.98% y/y and household credit growth was always likely to be on the back foot, given the adverse base effects of household PSCE growth having climbed to its highest point in November 2012. The Household Debt to Income level has moderated slightly to 75.5% in Quarter 3: 2013 after experiencing a marginal increase from Quarter 1: 2013 to Quarter 2: 2013. This lingering stickiness in pre-existing debt levels presents a notable impediment to incremental credit uptake.

 

  • The Quarterly Labour Force Survey (QLFS) reported quarter on quarter formal sector job growth back in positive territory, with growth of 0.2% reported quarter on quarter for Quarter 3: 2013. The manufacturing sector (which accounted for 13.5% of total formal employment as of Quarter 3: 2013) has seen formal sector jobs contract since Quarter 1: 2012, except for Quarter 3: 2012, on both a q/q and y/y basis. In Quarter 3: 2013, 1,000 jobs were lost within this sector.

 

Standard Bank VAF Affordability:

 

  • For the year 2013 Standard Bank experienced positive growth of 22.7% in applications compared to 2012.
  • The Average Contract Term has risen from 63.7 months to 67.2 months (January 2012 to November 2013), whereas the Average Term the account is Retained is 40 months.
  • The percentage of Deposits to Total Applications has been decreasing, while the percentage of Applications with Residual Values to Total Applications trend is increasing consistently over the past two years. This indicates that the consumer is attempting to manage the monthly repayment amount at the minimum possible, and thereby assisting with the take-up of higher ticket value vehicles.
  • The % of Applications with Deposit has decreased from 37.5% to 30.7% and the % of Applications with RV’s has increased from 8.9% to 15.7% (January 2012 to November 2013).

 

Analyzing the 2013 Market:

After the first seven months of the year it looked like the forecasters at motor companies and industry experts were on track with predictions of around 6% growth in new vehicle sales – at the end of July 2013 new vehicle sales were up by 6.9% year on year YTD. However the labour strike that began in August as well as subdued economic growth (and the impact of the Rand Exchange rate) conspired in the latter part of the year to the slowdown in vehicle sales.

Export Market:

The strike’s biggest impact was on exports, while local sales had a slightly less impact due to manufacturers and dealers having stock in hand. At the end of July 2013 Exports was up by 14.2% year on year YTD, which was on course for achieving the original forecast of 336,000 for 2013. However, the Manufacturing and Auto Component strike dampened a potentially strong year in exports. Since the strike in August the Exports market never recovered and experienced four (4) consecutive months of negative YTD growth, ending the year -0.8% down from 2012. This shows that the 45,000 cars that were lost in production in the seven week long strike were never recovered.

 

Local Market:

 

Although the impact of the strike was felt more on the Exports side, the local and Import market did encounter stumbling blocks in 2013. Due to manufacturers and dealers having stock in hand the industry strike had a much smaller impact on local vehicle sales. YTD 2013 the local market ended on a meager 3.17% growth year on year. This is somewhat disappointing when you consider that the local market was 6.9% up year on year YTD July 2013 – this is however a reflection of the impact of subdued economic growth and negative impacts of the Rand Exchange rate.

Impact of Rental sales in 2013:

 

The overall market in South Africa has grown by 3.17% YTD. However, the rental market has grown by 27.2% YTD. This has come about as rentals had a strong season in September and October growing year on year by 23.2% and 5.3% respectively.

The contribution of rentals to the total market is in single digits at 9.2%, up from 2012’s 7.4%. However, in the four months between August and November 2013, where the total market had experienced four (4) consecutive months of negative YoY growth, rentals have grown on average by 14.5%. The strong sales numbers to Rental companies may reflect both the need to replenish stock in the Rental business, as well as these companies taking advantage of the strong pre-owned market to attain reasonable prices on disposal of their vehicles.

 

Current Vehicle Market Trends:

One definite trend in the market is that small capacity engine vehicles will continue to grow and gain market share. In 2008 small vehicles (0 to 1.7ltr) made up 60.4% while medium sized vehicles (1.8 to 3.0ltr) contributed 34.2% of the total passenger market. In 2013 January to November small engine sized vehicles grew to 66.4% of the passenger market while medium size vehicles dropped to 30.5%.

After years of possible nonchalance towards fuel consumption and motoring costs, South Africans appear to be finally taking these issues seriously. Fuel prices have risen by 22.7% in petrol (inland) and risen by 21.1% in diesel (inland) since Jan 2012 to November 2013.

Manufacturers have also done a lot to improve on the styling and specs of smaller, fuel efficient vehicles.

 

2014 Vehicle Sales Outlook:

 

This year has ended as the third best year for domestic sales, and thus the baseline from which to project growth in 2014 is fairly high. With that in mind and taking into account the prevailing factors that will be influential, growth in 2014 is likely to be muted.

 

Factors that will inhibit growth include the following:

  • Low level of economic growth is expected in 2014, 2.5% for 2014 (Standard Bank Research).
  • High level of unemployment (24.7%) is expected to persist.
  • Rising inflationary pressures will remain a challenge. Food, fuel, above inflation wage settlements, as well as Exchange Rate fluctuations will pose risks to the inflationary outlook.
  • Exchange Rate fluctuations will also have an impact on vehicle pricing. With two thirds of vehicles sold in RSA being imported (NAAMSA) pricing will be vulnerable to a depreciating Rand.
  • The Credit Worthiness level of consumers is not improving. Only 51.9% of credit active consumers are in good-standing.
  • South Africa’s debt to disposable income level has moderated slightly to 75.5% in Quarter 3: 2013 from 75.8% in Quarter 2: 2013. This lingering stickiness in pre-existing debt levels presents a notable impediment to incremental credit uptake.
  • The Bureau of Economic Research’s Retail Survey has noted that Business Confidence amongst vehicle traders is at the lowest levels seen since 2009 (22pts).
  • The Replacement Cycle may be reaching its peak with 2013 seeming to be the end of the cycle.

Factors that point to growth in 2014:

  • The interest rate environment remains favorable for financing of vehicles even with the forecasted increase during 2014.
    • We have seen an increase in new vehicle prices due to the pressure of exchange rate fluctuations. However, prices of vehicles have grown at a lower rate than that of Consumer Price Inflation. New Vehicle Prices have grown by 4.14% (Quarter 3: 2013) this year.
      • There is still good demand in the second hand market, this bodes well for the new car market as it enables trade-in to be feasible.  This even with a 3% negative growth in used car pricing (-3.09% in Quarter 3: 2013).
      • The South African vehicle market is a competitive one – with South Africans crazy about cars, manufacturers are pushing creative marketing and incentive programmes as they fight for market share.
        • New model introductions, extended warranties, service plans and sales incentive schemes will remain prevalent in a consumer friendly sales environment.
        • Financial institutions have also created a wide variety of financing options to meet the needs of consumers.

The 2014 industry growth projection is off a high base from 2013 and therefore our 2014 forecast sits around 2%, which would end the market at around 663,000 units.