The WesBank Car of the Year winner for 2013 is the Porsche Boxster, as unveiled last night at a gala event held at the Sandton Convention Centre. The event, the 28th in its history, was once again judged by the South African Guild of Motoring Journalists and sponsored by WesBank.
7 March 2013: The passenger car vehicle market is expected to grow by just 2% in the current year, according to WesBank CEO, Brian Riley, who gave his predictions for the year ahead at the WesBank Car of the Year event in Sandton last night (Wednesday 6 March).
Riley predicts that the LCV market, however, is likely to perform a little better. “There is some activity in the SME market and LCVs remain a popular passenger alternative and we see LCVs growing by 3%. In the commercial market, which includes all medium, heavy, extra heavy and buses, we see some reasonable activity in the medium and heavy categories with little growth in the extra heavies and buses, with 4% growth overall in commercial vehicles.
“This means that total vehicles are predicted to grow by 14 594, which is an overall increase of 2.4% to just under 640 000 vehicles. I would like to have said 7% or 8% but we just can’t find the reasons why that would materialise. This number will provide a very healthy living for all of the industry participants but I think we will see some evidence of intense competition,” says Riley.
Riley believes that when looking at prospects for 2013, the strength of the economy is unlikely to provide much stimulus to vehicle sales. “Our view is that GDP will be sub-trend at a tepid 2.2% for the year. While this is hardly a number to get excited about, we should remember that it remains positive and is far better than most of the figures coming out of Europe. For the customer, once again there is real value, good service standards and a vast menu to choose from when purchasing a new vehicle.”
He says WesBank expects CPI to breach the 6% level at some point, but on average to remain slightly below the high end of the South African Reserve Bank-imposed target of between 3% and 6%.
“After a number of years of sub-CPI vehicle price increases, we believe that we will be looking at increases this year of at least CPI. We also predict a fair amount of rand volatility – currently it is hovering around the $9.00 mark but the risks are pointing to further weakening. On the positive side, we don’t see any upward movement in interest rates for the foreseeable future.”
Riley says benign GDP growth would suggest that the Reserve Bank should cut rates to stimulate growth: “However, we think this unlikely, as bond yields need to remain appealing to continue to attract the necessary capital to fund the current account deficit.”
He equates the performance of the motor industry and the general South African economy to comparisons between Asia and Europe: “Off a high base we managed significant growth last year comparing well to the rest of the world. Exports were solid last year but are set for a quantum leap in 2013 as new markets open up in Africa, alongside the traditional European trading partners.”
Riley believes that growth must be more muted although January certainly surprised on the upside. “In WesBank’s 45 years of trading this is the first time we have exceeded the preceding December’s new business performance in January. February brought us back to earth reflecting a 1.6% growth year on year. The accumulated growth stands at 7.6% but which way will it go from here?”
Riley comments that the recently published WesBank Vehicle sales Confidence Indicator (WVsCI) confirms that dealers are optimistic, at confidence levels of 6.5 and over 7.0 (out of 10) for both a current and also a three- and six-month forward looking basis. He says he regards this as an indication that dealers are more optimistic than WesBank for the year ahead.
“Applications remain buoyant, although to counterbalance this, there is some pressure on affordability. The contract periods have been extended to the maximum and the settlement period is unlikely to speed up, given the lack of equity in the assets for the first four years of a contract. New car buyers are likely to find the late model used vehicles a reasonable alternative with used cars depreciated and priced at the most competitive levels they have been in years.
“I believe that the industry is in something of a sweet spot, which will not be challenged this year but we cannot outgrow the GDP of the country indefinitely. If we do, it will come from an artificial stimulus such as excessive stock, a pricing war or irresponsible lending, none of which are sustainable.”