Vehicle manufacturing industry booms in South Africa

 

After suffering through the economic recession, the local vehicle manufacturing industry has clawed back significantly over the last 15 months and further growth is forecast.

The total of 53 478 new vehicles sold in March is the highest since March 2008. It represents a 22.8% sales growth compared to the same period in 2010.

Figures released by the National Association Automobile Manufacturers of South Africa (Naamsa) on April 4 also show that exports also climbed to 29 254 new vehicles, a 37.4% year-on-year improvement.

A total of 492 956 new vehicles, including cars, trucks, buses and vans, were sold in 2010. This was a 24.7% improvement from the 395 186 sold in 2009, when recession was at its worst.

“The market has grown by nearly a quarter in the first three months of this year,” said Dr Johan van Zyl, president and CEO of Toyota South Africa Motors. “This is a very promising trend that supports the view that South Africa is maintaining its momentum out of the recession it experienced in the latter part of the last decade.”

Passenger vehicles are leading the growth revolution; 35 167 new passenger cars were sold in March. Light and medium commercial vehicles recorded combined figures of 16 620. A total of 1 118 extra heavy trucks and 482 heavy trucks were sold in the month, as well as 91 new buses.

The decline in the bus market is due to large buying ahead of the 2010 Fifa World Cup Soccer, Toyota said. Improvement is expected later in 2011 when bus companies renew their fleets.

Nissan is one of the companies that have scored from the resurgence of passenger vehicle sales. Johan Kleynhans, Nissan South Africa’s director of marketing and sales, said their sales got back on track after a slow start to the year.

“We enjoyed strong sales in individual model ranges, including Qashqai, X-Trail and NP300.  Our NP200 light commercial vehicle enjoyed record sales of over 1 264 units,” Kleynhans added.

Nissan enjoyed a 23.4% new sales growth over February and were up 7.8% for the first quarter compared to the same period last year.

The VW Polo Vivo remained the most popular passenger vehicle, as it recorded 2 144 sales. It was followed the Toyota Corolla with almost 2000 new vehicles sold. The Mercedes Benz C-Class and BMW 3-Series also recorded significant sales, each reaching more than 1000 monthly units.

Confidence of growth 

Some industry experts are now confident that the industry may reach the 550 000 yearly sales record in 2011, but are cautious.

“The strength of the vehicle market in the first quarter… has led to forecasters raising their expectations for the year with total sales in excess of 550 000 now a possibility but by no means a certainty,” said Malcolm Gauld, an executive from General Motors South Africa (GMSA).

Companies are generally confident of sales improvements through 2011, which have so far been supported by a strong economy.

Nissan is one of the groups that expect their overall vehicle sales in 2011 to be well up on last year. “We are positive about prospects for continued improvement through the rest of the year,” said Kleynhans.

But challenges are expected

Gauld predicted in February that sales are likely to abate later in the year. “However double digit growth remains a realistic goal for the year,” he said of his company’s prospects.

Due to the number of holidays, April will be a problematic month for continued sales growth.  “While first quarter sales have been exceptionally strong, April will be a challenging month for the market due to fewer selling days as a result of the public holidays,” said Dean Stoneley, vice-president at Ford South Africa.

The looming introduction of road tolls on Gauteng’s roads is one of the factors that may put off prospective buyers, according to GMSA. Climbing fuel prices also do not bode down well for the industry.

Economic dynamics such as the expected interest rate hike could impede further growth in upcoming months.

“One must be cognisant of the negative factors that may have an influence on vehicle sales in coming months,” says Dr Van Zyl. “Apart from less sales days, we expect rising inflation, possible future rises in interest rates and a jump in fuel prices to have a negative effect on sales in coming months.”