Domestic new vehicle sales in May were 6% up on April 2013 and 7.5% higher than May 2012. Passenger vehicles sales, which accounted for 69% of the total, increased by 7.8%% on the April sales, while total commercials showed a 2.2% increase in May.
Commenting on the general retail vehicle finance sales and related trends, he notes that the bank's application count in May again grew significantly but the approval rates declined marginally, due to a decline in the quality of applications. Applications received and scored with a finance term > 60 months = 76% (April 76%) and applications received and scored with residual values requested = 16% (April 15%). The overall daily sales rate for May was 2454, which compared well with April.
"The industry is moving to a 72-month finance period, as the number of applications in this term category increases each month. The main driver behind this is affordability but it has the downside of an ever-increasing average contract period, which will continue to lengthen the replacement cycle.
"The percentage of applicants requesting residual values/balloon payments has ticked up in May after being stable over the past months."
The last update on the industry level of vehicles financed, at the end of April, showed a ratio of 1.67:1 (used versus new). The average for 2013 has improved slightly to 1.58:1 but it is still well off the level of 1.75:1 achieved in 2012. New vehicle sales are holding up much better than used sales, due to new affordable releases with high specification levels and attractive manufacturer incentives which aid affordability. Many vehicles now also come standard with warranty and service plans that give the buyer peace of mind.
"We still expect new vehicle sales to grow with mid-single figure percentages for the year. In general, vehicle sales will be affected by the following factors:
"Interest-rate sensitive sectors in the economy, such as the vehicle sector, will continue to be supported by lending rates expected to remain low for longer, which will support the affordability of vehicle finance. Given that many consumers are still highly indebted and finding it difficult to obtain credit for higher priced vehicles, demand for favourably priced entry level vehicles and good quality used vehicles will remain strong.
"The entry-level passenger car and new model releases, which accelerate demand, are expected to be the main contributors to growth in 2013. New vehicle sales in this segment have shown a 39% increase in sales for Q1 2013 vs Q1 2012.
"Vehicle exports by South African manufacturers are well ahead of last year and expected to show growth on 2012."
"Expected higher new vehicle price inflation because of the weaker exchange rate over time will have a positive impact on used car sales. The Q1 2013 price inflation is at a level of 2,4% on new vehicles and -1,4% on used vehicles. However, the recent sharp depreciation in the rand exchange rate will put upward pressure on vehicle price inflation during the rest of the year, which will affect the affordability of new vehicles and vehicle buying patterns.
Note: Sales data by Great Wall Motors are excluded from the figures.
