NAAMSA MEDIA RELEASE - Dec 2011 comments

COMMENT ON THE DECEMBER 2011 MONTHLY SALES, CALENDAR 2011 NEW VEHICLE SALES STATISTICS AND COMMENT ON PROSPECTS FOR 2012 | Click here for the stats

1.              Brief Comment on December, 2011 Sales

Despite the fact that detailed sales of Mercedes-Benz vehicles were not reported during December, 2011 - new vehicle sales ended the year 2011 on a relatively buoyant note with aggregate industry new vehicle sales at 43 790 units recording an improvement of 4 335 vehicles or a gain of 11% compared to the total new vehicle sales of 39 455 units (inclusive of Mercedes-Benz sales) during the corresponding month of December 2010.

Factoring in a conservative estimate of Mercedes-Benz’ December, 2011 sales, the total market for December last year would have been around 45 200 vehicles or an estimated improvement of around 14.5% on the corresponding month last year.

December 2011 export sales, excluding Mercedes figures, at 13 665 units reflected a decline of 38.3% or a fall of 8 492 vehicles compared to the 22 157 vehicles exported in December 2010.

2.         Comment on Year 2011 New Vehicle Sales, Automotive Industry Exports and Aggregate Industry Production

 For 2011, new vehicle sales were broadly in line with NAAMSA expectations which had projected an improvement in new vehicle sales for the year of up to 15%. In the event, industry aggregate sales for calendar 2011 at an estimated 571 425 units had improved by 78 518 vehicles or about 15.9% compared to the total of 492 907 new vehicles sold in South Africa during the previous year. Furthermore, factoring in the total sales reported by Great Wall Motors of 6 545 units for calendar 2011 – not split according to segment – the total South African new vehicle market last year would have been around 578 000 vehicles.

 The higher aggregate industry sales total for 2011 should however be seen in perspective in that they remain well below the record total domestic market of 714 315 vehicles achieved in 2006.

 Aggregate annual industry sales by sector, over the past four years, were as follows –

*      Using historical sales trends and forecasting techniques, NAAMSA’s third party service provider, RGT Smart, have calculated industry sales including projections for Mercedes sales

 On balance, 2011 turned out to be a year of relatively solid growth. Industry trading conditions, however, remained intensely competitive with over 60 brands and close on 2200 model derivatives, in the new car and light commercial vehicle sectors, competing for consumers’ franchise. Initial calculations indicated that motor industry new vehicle related sales turnover had grown by about 18%, based on volume increases and a weighted average estimated increase of about 4% in new vehicle prices, during 2011 to reach about R160 billion for the year. The used vehicle market was estimated to have reached about 650 000 units which in turn had provided support to the automotive retail and distributive trade.

Export sales performed relatively well during 2011. However, 2011 Industry vehicle exports at just under 272 000 units remain below the original projections for the year of exports of over 300 000 vehicles. Nevertheless, the 2011 exports represent the second highest annual export figure on record.

2011 Industry export sales data, compared to the previous three years, were as follows –

*         Using historical export trends and forecasting techniques, RGT Smart have calculated industry export sales including estimates for Mercedes export

South Africa’s track record as a reliable manufacturer and supplier of high quality vehicles and automotive components to world markets has been firmly established. The Industry’s export sales performance will however depend on the direction of the global economy and the contribution of new export programmes. South Africa currently exports vehicles to 77 countries.

Assuming continued demand in most export markets, projected higher exports to African countries and factoring in the contribution of the Ford global compact vehicle export programme – industry export sales during 2012 could improve by some 50 000 vehicles or 18.5% over 2011. Total Industry exports are projected to reach about 320 000 units during 2012.

3.         Industry Prospects For 2012: MODEST IMPROVEMENT in Domestic Sales Anticipated, Aggregate Domestic Production COULD ALSO Rise As a Result of FURTHER GROWTH IN Export Sales

On the assumption that the South African economy will grow, in real terms, by between 3% and 3.5% in 2012 and taking account of expected other domestic and international trends– the outlook for 2012 in terms of Industry vehicle sales by sector is summarised in the table hereunder –

The 2012 projections translate into a conservative expected improvement of about 7.0% in domestic sales volumes for the year.

New vehicle sales over the short to medium term will remain a function of the performance of the domestic economy and, in the case of export sales, the sustainability of recovery in the global economy.    

Economic factors and developments which will affect the performance of the Automotive Industry during 2012 include, on the positive side -

• Following the strong improvement in trading conditions in the automotive retail market in 2010, the recovery continued throughout 2011. The positive underlying momentum should continue into 2012 with demand supported by historic low interest rates, improved vehicle affordability, new high technology model introductions, easier access for consumers to vehicle finance and pent-up demand resulting from owners having extended their vehicle replacement cycles during the financial and economic crisis three years ago
• Expectations that growth in the South African economy during 2012 will be in the range of 3.0% to 3.5% supported by pre-emptive steps by the authorities to promote economic stability, investment, growth and employment in order to cushion the impact on the economy of a possible recession in Europe. Internationally, coordinated action and policies by monetary and fiscal authorities should also support economic activity levels in developed countries, albeit off an extremely low base
• Demand by the car rental Industry was exceptionally strong during 2011 and should continue to make a positive contribution on the back of further growth in tourism and business travel in 2012
• A sound and stable monetary and fiscal policy environment as well as a stable Automotive Industry Development Policy Framework which continues to provide manufacturers with the certainty and predictability required to make investment decisions

On the negative side, the following factors remain relevant –

• Rising inflationary pressures in 2012 and the associated threat of upward pressure on interest rates. Higher interest rates will constrain demand for new vehicles
• South Africa’s economic performance is inextricably linked to the fortunes of Europe, the United States and Asia.       Huge debt problems persist in the US and Europe and other developed countries. Any deterioration in global financial markets could result in a prolonged lower growth period with negative knock on effects on the South African economy and exports in particular
• Domestic and International geo political events always represent imponderables which could unsettle markets and sentiment

Internationally and domestically, vehicle manufacturers will continue to focus on new models and products through sustained investment in new technologies. In South Africa, the industry continues to view the need for more environmentally friendly fuels and vehicles as critically important.

Factoring in the expected improvement in domestic sales together with the anticipated growth in exports, domestic production of motor vehicles in South Africa during 2012 was expected to rise from the approximately 540 500 vehicles produced in 2011 to about 610 000 units in 2012 – an increase in vehicle production of about 13%. This compares to 472 049 new vehicles produced by the Industry in 2010.

The projected higher levels of vehicle production are consistent with NAAMSA’s 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 1.2 million vehicles by 2020.

2012 is likely to prove another challenging year for the SA Automotive Industry. The Industry is, however, well positioned to continue to make a positive contribution to the South African economy, particularly if economic growth in excess of 3.0% materialises.

Best wishes for 2012 to NAAMSA subscribers, the media and automotive industry stakeholders.