NAAMSA expects improvement in vehicle sales in second half of 2017

JANUARY 10, 2017
NAAMSA expects improvement in vehicle sales in second half of 2017

Industry domestic sales ended 2016 on a weak note with aggregate industry new vehicle sales for December, 2016 at 41 639 units recording a decline of 7 519 vehicles or a fall of 15.3% compared to the total new vehicle sales of 49 158 units during the corresponding month of December, 2015, reports the National Association of Automobile Manufacturers of South Africa (NAAMSA). 

"The December, 2016 new passenger car market and light commercial vehicle market reflected a year on year volume change of -14.0% in the case of cars and -17.8% in the case of light commercial vehicles.  Sales of medium and heavy commercial vehicles declined by 18.2% year on year," the association said. 

"In contrast, export sales had recorded an improvement in December, 2016 and at 18 668 units reflected a gain of 1 222 vehicles or 7.0% compared to the 17 446 vehicles exported during December, 2015."

COMMENT ON 2016 NEW VEHICLE SALES AND VEHICLE EXPORTS:   ANOTHER CHALLENGING YEAR WITH LOWER DOMESTIC SALES OFFSET BY CONTINUED GROWTH IN VEHICLE EXPORTS

NAAMSA said that for the third year in succession, new vehicle sales during 2016 in South Africa recorded a year on year decline. 

"The slowdown in the domestic economy, above average new vehicle inflationary pressures, increases in interest rates, pressure on consumers’ and household disposable income and low levels of consumer confidence had contributed to a double digit decline in annual domestic sales volumes," it described. 

"In the event, aggregate sales during 2016 fell by 11.4% in volume terms to 547 442 units compared to the sales total of 617 648 in 2015."

Annual aggregate annual industry salesby sector, since 2010, were as follows –

 

Sector

 

2010

2011

2012

2013

2014

2015

2016

2016 / 2015

% Change

Cars

337 130

396 292

442 604

450 296

438 942

412 478

361 273

-12.4%

Light Commercials

133 756

149 301

160 174

167 996

173 759

174 701

159 128

-8.9%

Medium Commercials

   7 557

     9 218

    10 104

  11 584

11 024

10 394

8 447

-18.7%

Heavy Trucks,  Buses

14 464

   17 438

   17 737

  19 340

20 534

20 075

18 594

-7.4%

Total Vehicles

492 907

572 249

630 619

649 216

644 259

617 648

547 442

-11.4%

Source:  Lightstone Auto, NAAMSA

"Overall, 2016 turned out to be another extremely difficult year for the South African automotive industry with domestic new vehicle sales progressively under pressure, particularly at dealer level, despite attractive sales incentives and a strong contribution by the car rental sector which accounted for an estimated 16.3% of new car sales during the year. 

"Industry trading conditions had remained intensely competitive characterized by pressure on dealer margins.  Preliminary estimates of 2016 motor industry new vehicle related sales turnover indicated a decline of about 2.0%, taking account of sales volumes, changes in mix and a weighted average estimated increase of about 14.0% in new vehicle prices – to reach about R233 billion for the year," NAAMSA said. 

"Industry new vehicle export sales were estimated to have added a further R105 billion to total Industry 2016 revenue."

It said that 2016 Vehicle exports represented the highest annual Industry export figure on record and total vehicle exports at 344 822 units were up on the 333 847 vehicles exported in 2015. 

2016 Industry export sales data, compared to previous six years, were as follows –

 

2010

 

2011

 

2012

2013

2014

2015

2016

2016 / 2015

% Change

Cars

181 654

187 529

153 268

153 545

156 600

229 723

238 567

3.8%

Light Commercials

 56 950

  84 125

123 648

121 653

118 922

103 000

105 152

2.1%

Trucks & Buses

      861

       803

    1 076

    1 206

    1 414

1 124

1 103

-1.9%

Total Exports

239 465

272 457

277 992

276 404

276 936

333 847

344 822

3.3%

Source:  Lightstone Auto, NAAMSA

"Assuming further improvement in the global economy – industry export sales during 2017 could improve by some 30 000 vehicles or about 10.0% to reach a conservative projection of 375 000 export units," the association further said. 

"In summary, the decline in domestic sales was offset to a limited extent by continued growth in vehicle exports which in turn assisted in sustaining utilisation capacities and employment levels of vehicle manufacturers."

INDUSTRY PROSPECTS FOR 2017:  MODEST IMPROVEMENT IN DOMESTIC NEW VEHICLE SALES DURING THE SECOND HALF OF THE YEAR TOGETHER WITH FURTHER RELATIVELY STRONG GROWTH IN VEHICLE EXPORTS

NAAMSA said 2017 is expected to be another difficult year for the domestic SA auto industry, however, a modest improvement in new vehicle sales is expected during the second half of the year. 

"Industry production levels, on the back of expected further growth in vehicle exports, should however remain in an upward phase. 

"At this juncture, 2017 projections for South Africa reflect an expected improvement in GDP growth to around 1.5% (from 0.4% in 2016), in gross domestic expenditure to over 2.0% (from -0.3% in 2016), in growth in private consumption expenditure to about 2.0% (from 0.8% in 2016) and in fixed investment to around 2.2% (from -2.5% in 2016)," it described. 

"Improvement in growth prospects is premised on the easing in drought conditions, the improvement in commodity prices, a decline in inflationary pressures on the back of a stronger Rand as well as recent improvements in the Purchasing Managers’ indexes and the Reserve Bank’s leading indicator.

"On the negative side, domestically, elevated political tensions are likely to continue to weigh on business confidence and the expected increase in taxes in this years’ budget will erode real purchasing power. 

"Internationally, volatile and uncertain conditions are likely to prevail during 2017.  Elevated geo-political tensions and political uncertainty in major advanced economies associated with elections could heighten global risk aversion and trigger confidence shocks.'

NAAMSA added that despite these considerations, the global economic outlook at this stage, remains positive and should continue to lend support to South Africa’s improving vehicle export performance. 

"Ultimately, industry vehicle exports would remain a function of the performance and direction of global markets.  Vehicle exports to Europe, Australasia, the United States, Asia and South America were expected to show further upward momentum." 

The outlook for 2017 in terms of Industry domestic vehicle sales by sector is summarised hereunder –

 

Sector

 

2015

2016

2017 Projected

Cars

412 478

361 273

370 000

Light Commercials

174 701

159 128

163 000

Medium Commercials

10 394

8 447

9 000

Heavy, Extra Heavy, Commercials, Buses

20 075

18 594

19 000

Total Vehicles

617 648

547 442

561 000

 

"The general expectation in the industry was that domestic new vehicle sales would remain fairly flat going into 2017. 

"NAAMSA remained hopeful, however, that on the back of the expected improvement in key economic indicators, domestic sales would regain some traction in the second half of 2017 with year over year growth perhaps settling in the 2.5% to 3.5% range and hold to around that level going forward," the association said. 

"Factoring in the expected improvement in exports, domestic productionof motor vehicles in South Africa was expected to show an increase from 604 000 vehicles produced in 2016 to close on 641 000 vehicles in 2017 – an improvement in vehicle production of about 6.0%  This figure could prove conservative if vehicle exports expand more than currently anticipated.

"The projected higher vehicle production was consistent with the official vision for the Industry which is to remain a premier supplier of high quality, competitive automotive original equipment parts and accessories and vehicles to international markets and, in the process, to achieve an annual domestic vehicle production figure of close to 850 000 vehicles by 2020. 

"Internationally and domestically, vehicle manufacturers would continue to focus on new models and products through sustained investment and new technologies.  Technologies such as artificial intelligence could begin to reflect a tangible impact across sectors.  Autonomous vehicles and driver assisted automatic systems as well as increased use of information technology in vehicles were likely to feature in the future."