Fairland, Gauteng -- (SBWIRE) -- 01/31/2013 -- WesBank – South Africa’s leading asset-based financial solutions provider has reported no change in the WesBank vehicle sales confidence indicator for the fourth quarter in December 2012 which some dealers attribute to civil unrest and concerns over the economy.
Confidence regarding sales activity among South Africa’s automotive dealers remained unchanged in the fourth quarter of 2012, as some dealers believe that continuing strong vehicle sales data has been tempered by on-going civil unrest and concerns about the economy.
According to results from the latest WesBank Vehicle sales Confidence Indicator (WVsCI)* for the fourth quarter of 2012, overall confidence levels in sales activity amongst dealers remained unchanged at 6.0 out of 10. Confidence in future sales activity was barely changed at 6.5 and 6.7 for the next 3 and 6 months respectively, compared with 6.5 and 6.8 in the previous quarter.
Chris De Kock, Executive Head of Sales and Marketing at WesBank, says the local vehicle sales industry has performed strongly so far in 2012 but notes that there is a general feeling that the tide may now be turning. “Vehicle sales have performed exceptionally well over the last two years and the latest NAAMSA figures demonstrated that there is still plenty of demand among consumers. However, confidence among dealers regarding activity for the next few months is subdued, which is to be expected given recent events locally and concerns about the economy.”
On factors that may prevent consumers from completing a purchase, 32% of dealers cited the economy and consumer confidence as the primary reason, compared with just 9% in the previous quarter. “Interestingly, 12% of dealers said that a low trade-in price is also a factor in preventing consumers from closing a deal on a new vehicle.”
Reflecting recent events, 16% of dealers said strikes and labour unrest would have a negative effect on future activity, while 11% cited political stability and elections, neither of which were highlighted in the previous quarter.
According to the WVsCI statistics, opinion among dealers on the positive factors that would drive future sales activity remains mixed with no clear reason cited. 29% said new products, 15% believe interest rates and 10% said economic factors.
New car sales vs Used car sales
De Kock notes that the fourth quarter has seen growth in the used vehicle market, with 34% of car dealers saying the used market is more active currently compared with 25% in the previous period, the highest recording on current activity for two years. “While the new vehicle market is clearly still the most active, it is interesting to see a shift towards used vehicles. We would expect this trend to moderate in the next three months, as consumers often look to buy new models at the start of the calendar year.”
De Kock says the WVsCI also shows that consumers do remain cost conscious, with pricing and incentives proving crucial reasons for new car sales. 12.9% of dealers said incentives for new car sales and special deals were keeping the new segment more active, whilst 15.9% cited good pricing and cheaper options.
According to WesBank book data in the below graph, there has been a marked shift towards new vehicles over the last three years, with the used: new ratio falling from a high of 2.69 in April 2009 to just 1.77 in October 2012.
“Demand for new vehicles has remained strong over the last few years; due in part to the small price gap between used and new vehicles and a shortage of late model used vehicles as a result of the slow sales during 2007/08/09. However, this is likely to change as we begin to see more vehicles purchased during the start of the current cycle coming back into the market.”
De Kock notes that whilst growth in new vehicle sales may slow in the coming months, the introduction of new models, combined with consumers taking advantage of the low interest rate environment to obtain an advantageous fixed rate deal before rates start increasing, will continue to support the market.
“The market has performed exceptionally well during the course of 2012 and we expect overall sales growth in new vehicle sales to reach the high single digits by the end of the year, possibly even into double digit growth, which is very positive given that we are coming off a comparably high base,” concludes De Kock.
*The WesBank Vehicle sales Confidence Indicator (WVsCI) polls over 250 new car dealerships throughout South Africa on issues such as current and expected sales activity levels, as well as factors affecting purchasing decisions amongst buyers.
About Wesbank
WesBank has over 40 years of experience in asset and vehicle finance. As a leading asset-based finance provider in South Africa, we finance new and used vehicles for personal use, both privately and through dealerships, as well as leisure vehicles, and also offer expert advice and professional service to our clients.
Our other main focus is providing quality asset finance and fleet management solutions for a number of market sectors. WesBank’s asset finance services cover aviation finance, agri finance, commercial vehicle finance, company vehicles, plant equipment, office equipment, public sector finance and franchise finance. In addition, we offer personal insurance, vehicle insurance, personal loans as well as business insurance, and we are perfectly placed to structure a finance deal to suit your needs.
WesBank is a division of FirstRand Bank Limited, which in turn, is part of the FirstRand Group. FirstRand is South Africa's most innovative Bank Assurance Group with interests in Retail and Merchant Banking, Life Assurance, Financial Planning and Medical Schemes.