Vehicle sales decline in November despite marginal improvement of 0.9% year on year

“New car sales for the month of November 2014 show a marginal improvement of 0.9% year on year. Passenger vehicles continue to show strain as evidenced by the latest figures. This is anticipated to continue through 2015”

[Nicholas Nkosi – Head of Standard Bank Vehicle and Asset Finance – Personal Markets]

General Comments on November 2014 NAAMSA sales:

• The month of November 2014 experienced a 13.95% decrease in sales compared to October 2014.
• Month on Month Passenger vehicles declined by 18.16% while Light Commercial Vehicles declined by 4.73%.
• Year on Year monthly comparison shows a marginal improvement increase of 0.92% in November 2014 compared to November 2013.
• Year to date (January – November 2014) comparisons shows that vehicle sales are down by 1.60% in the first 11 months of the year when compared to last year.
• Month on month Exports decreased in November 2014 by 12.89%. Passenger vehicles for exports increased by 3.79% while Light Commercial Vehicles decreased by 33.97%.
• Year on year monthly comparison shows an improvement in exports of 9.88% in November 2014 compared to November 2013.
• AMH & AAD decreased in November 2014, 11.95% month on month.

General Comments on November 2014 Standard Bank VAF Personal Applications:

• In November 2014 applications for both new and used vehicles experienced negative month on month growth, 1.1% and 3.9% respectively.
• Applications in both Passenger (2.5%) and Light Commercial vehicles (4.0%) had negative month on month growth in November 2014.
• The number of applications with RV’s increased by 1.8% month on month while the number of applications with deposits decreased by 3.2% month on month.
• The Average Contract Term on applications increased from 67.0 months to 69.2 months (November 2013 to November 2014), year on year growth of 3.3%.
• The average application size increased from R194 139 in November 2013 to R215 301 in November 2014, a 10.9% year on year increase.

General Comments on November 2014 Standard Bank VAF Personal New Business:

• In November 2014 new business experienced positive month on month growth of 4.7% in the used vehicle market. In contrast new vehicle market declined by 1.5% month on month.
• Passenger vehicles and Light Commercial vehicles both had positive month on month growth, 2.9% and 0.8% respectively.
• New business deals with deposits decreased month on month by 3.3% and declined by 16.7% year on year.
• New business deals with RVs increased month on month by 12.3% and 79.3% year on year.
• The Average Contract Term increased from 65.3 months in November 2013 to 67.9 months in November 2014 (4.0% year on year growth).
• The average deal size increased from R265 228 in November 2013 to R309 301 in November 2014, a 16.6% year on year increase.

General Macro and Industry Comments:

• Real GDP growth for Q3:14 grew at 1.4% y/y and 1.4% q/q, up from revised rates of 1.3% y/y and 0.5% q/q in Q2:14. This was in line with consensus of 1.4% y/y, and 1.5% q/q. Average growth for the first three quarters of 2014 is 1.5% y/y.
• The SARB left the repo rate unchanged at 5.75% following its November MPC meeting. The outcome was in line with the industry’s forecast.
• Headline CPI annual inflation rate in October 2014 was 5.9%. This rate was the same as the corresponding annual rate of 5.9% in September 2014. On average, prices increased by 0.2% between September 2014 and October 2014.
• The transport index increased by 0.3% between September 2014 and October 2014. The annual rate increased to 4.8% in October 2014 from 4.2% in September 2014.
• Headline inflation is expected to reach a low of 5.1% y/y in Q2:15, and average 5.3% in 2015, and 5.5% in 2016, down from 5.7% and 5.8% respectively at the previous meeting of the MPC.
• Inflation expectations for 2014 fell slightly, from 6.2% to 6.1%, which requires an average inflation rate of 5.9% in November and December. It will be difficult to justify a rate hike in 2015, as these inflation forecasts begin to materialise, unless Fed normalisation causes a significant depreciation of the rand, on a trade weighted basis, such that inflation expectations rise.
• The retail price of 95 grade petrol will drop by 69 cents per litre from the 3^rd of December 2014 while the price of diesel (0.05 percent sulphur) would decrease by 53.50 cents a litre, and that of diesel (0.005 percent sulphur) by 54.30 cents a litre.

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