ANALYSIS: South African auto sector looks to build on positive 2010
South Africa's auto industry is upbeat about 2011 prospects
South Africa's auto industry is anticipating further growth to its automotive sector in 2011 after a year of steady improvement and rising sales in 2010.
New vehicle sales in South Africa ended the year at 39,504 units in December, some 30% ahead of the same month of 2009. Car sales were up by 38.9% and the automotive manufacturing sector was also boosted by still rising exports.
In 2010 as a whole, new vehicle sales in South Africa reached 492,956 units – a gain of 24.7% on the previous year.
However, the local trade association – Naamsa - cautioned that 2010's improvement is off a depleted recession-hit 2009 base and that 2010 sales were well below pre-crisis markets (the 2006 market was 714,315 units).
Naamsa also pointed out that industry trading conditions in 2010 remained intensely competitive with over 57 brands and close on 1800 model derivatives in the new car sector. The trade association also viewed 2010 as a mixed year on a macro level. Positives included the economic benefits from hosting the FIFA World Cup Finals and the impact of much lower interest rates. However, it said that growth in fixed investment remained relatively subdued and that widespread industrial action in South Africa and in the automotive sector during August and September, 2010 translated into a significant loss of production of automotive components and built-up vehicles.
The normalisation of production during the fourth quarter of 2010 did however contribute to a significant recovery in output, Naamsa said. A further feature during the latter part of 2010 involved the introduction of emissions taxation on new cars with effect from 1st September, 2010 which affected vehicle affordability. Naamsa also said that the high strength of the Rand throughout most of 2010 impacted on automotive industry exports, particularly exports of original equipment and replacement components.
Following the dramatic decline in industry new vehicle exports during 2009, export sales staged a recovery during 2010 with total exports at 239,456 vehicles, 36.9% up on 2009.
For 2011, industry vehicle exports are projected by Naamsa to rise to a record of over 300,000 units. It said that 'clear signs had emerged of continued strong demand for South African produced motor vehicles in international markets'.
Naamsa also said that new vehicle sales over the short to medium term would remain a function of the performance of the domestic economy and, in the case of export sales, the sustainability of the recovery in the global economy.
For 2011, domestic new car sales were projected to improve by about 10% in volume terms. New commercial vehicle sales, on the back of anticipated higher economic activity levels, could improve by up to 15%, Naamsa said.
Positive influence on the vehicle market include an improving economy, sales momentum as well as improved vehicle affordability due to the strong Rand and low interest rates. Demand by the car rental industry is expected to remain relatively strong on the back of further growth in tourism and business travel.
But Naamsa warned that rising inflationary pressures and the possibility of upward pressure on interest rates during the second half of 2011 could constrain demand for new vehicles while the South African economy and the automotive industry remained exposed to volatility in the exchange rate and, in the medium term, the possibility of exchange rate depreciation as the global economy recovered further.
From an export sales performance perspective, the sustainability of the global recovery represented a key factor.
Domestic production of motor vehicles in South Africa during 2011 is expected to rise from the approximately 470,000 vehicles produced in 2010 to about 550,000 units in 2011 – an increase in vehicle production of about 17%.
Aggregate annual industry sales by sector, over the past five years, were as follows
|Light Commercials||199,677||204,386||169,466||118,159||133,790||+ 13,2%|
|Medium Commercials||14,246||15,164||12,130||7,229||7,557||+ 4,5%|
|Heavy, Extra Heavy, Commercials/Buses||18,834||21,895||22,529||11,705||14,465||+ 23,6%|
|Total Vehicles||714,315||676,098||533,387||395,186||492,956||+ 24,7%|
2010 industry export sales data, compared to the previous four years, were as follows
|Medium, Heavy Trucks & Buses||539||650||1,227||831||861||1,000|
Against the background of current and expected domestic and international developments – the outlook for 2011 in terms of total industry vehicle sales - by sector were as follows
|New Light Commercial Vehicles||199,677||204,386||169,466||118,159||133,790||155,000|
|New Medium & Heavy Trucks & Buses||33,080||37,059||34,659||18,934||22,022||25,000|
|Total Domestic Sales||714,325||676,098||533,387||395,186||492,956||550,000|