::Barloworld ::New car sales
New car sales are going one way: down. The global credit crunch, volatile fuel prices, high interest rates and a lack of consumer confidence have dragged down local new car sales in 2008 by over 20% year-on-year, compared to 2007. A further drop of 15% is expected in 2009.
The recent weakening of the Rand has sent new car prices on an upward spike and banks have been cautious in extending credit to buyers. These factors have had a significant impact on new car sales figures, which are now at their lowest point since 2004.
Due to the dropping figures in new car sales, 2008 has seen many dealers close their doors as the industry’s retailers entered a viability and profitability crisis. It is notable that, in tough times, consumers tend to stick with the well-established brands and top sellers, in preference to brands perceived to be eccentric or exotic. The Chinese influx has also been watched with interest and these have fallen out of consumers’ favour to a certain extent as market conditions worsened. As a result, some of these low volume brands have already disappeared from the local market. Local manufacturers that export have had a very good year, but this is also expected to have peaked, and projections are lower for 2009.
There is some good news on the horizon. The recent dramatic drops in the fuel price will have a positive influence on the inflation rate, which may actually decline to within the target range set by the Reserve Bank. This will put disposable income back into consumers’ pockets. Interest rates are also likely to drop further.
However, credit remains tough to secure and personal debt levels remain high, which will see a further decline in new car sales in the first half of 2009. There is every reason to believe that market conditions will slowly start to improve towards the end of the year, amidst global optimism that the recession will be over before 2011. We should be thankful – so far, South Africa has been spared the worst of its effects.
