Now that the euphoria of the long anticipated Football World Cup is something of the past what lies ahead for the South African economy, which was artificially boosted when the country prepared for – and hosted – the world’s biggest sporting event? In particular, what awaits the local motor industry?
A basket of recently released data suggests that the economic recovery in South Africa is more fragile than we first thought. Some of the highlighters of the fragility were the latest Purchasing Mangers’ Index (PMI), which is a leading indicator of manufacturing activity and, rather disappointing vehicle sales in June. The PMI’s seasonally adjusted figure fell after being expected to rise, while vehicle sales grew by a lower amount than in May.
There will also be a decrease in infrastructural projects as many of them were linked to the World Cup and already there are retrenchments taking place in the construction sector.
Internationally there is talk of a possible “double dip” recession hitting the economies of many countries, particularly in Europe, and some of the new car markets are already shrinking as scrapping allowance programmes come to an end.
However, on the positive side for South Africa there is the possibility of further interest rate reductions, a falling fuel price and lower new car price inflation, which was at 3,9 per cent in the second quarter of the year after being at 7,4 per cent in the first quarter and at 8,7 per cent in the last quarter of 2009. This slow down in new car price inflation means that used car bargains are becoming increasingly scarce, but defleeting by the rental companies after the World Cup will provide a source of good quality used cars.
However, the situation in terms of vehicle sales was far healthier in the first six months of 2010 than in the first half of 2009. The aggregate overall vehicle market of 235 698 for the first half of 2010 was, in fact, 23,9 per cent up on the 190 203 units sold in the same period in 2009.
The passenger car market proved the most buoyant at 27,9 per cent up on the 2009 figure, with light commercials improving by 17,8 per cent and medium commercials (3 501 – 8 500kg GVM) disappointing with a fall of 1,9 per cent. Heavy trucks (8 501 – 16 500kg GVM) also showed a decrease, this time of 3,2 per cent, while extra-heavy trucks (over 16 500kg GVM) were up an encouraging 19,5 per cent. Large buses, boosted by World Cup demand were almost double the 2009 figure with an increase of 79 per cent.
Total truck and bus sales were up by 5,6 per cent on a year to date basis at 10 207 units compared to 9 664 for the corresponding six months last year.
Passenger market
Toyota, despite suffering harm to its brand image from the ongoing global recalls of its products, continued to lead the way in South Africa, where it has been the overall market leader since 1980. However, its share of the market fell 1,2 per cent from 25,3 per cent a year ago to 24,2 per cent, while its arch rival, Volkswagen, boosted by a number of important new model launches, put pressure on the Japanese company by boosting its share by 2,1 per cent to 17,1 per cent.
The rest of the top seven manufacturers remained constant in the following order: General Motors SA, Ford, Mercedes-Benz, Nissan and BMW. The big surprise was Renault, which is showing a most impressive turnaround… La Regie jumped from 10th to eighth with sales volume up 85,5 per cent and penetration growing by 0,7 to 2 per cent of the market, excluding the non-reporting brands from Associated Motor Holdings (AMH).
Honda was the company previously in eighth spot and it has now fallen to ninth, ahead of Jaguar/Land Rover, which outsold Chrysler/Jeep/Dodge that had been in ninth position at the half-year mark last year.
However, the stellar performance of the six-month period came from importer AMH, which was riding the crest of the wave as its leading brands, Hyundai and Kia, benefited from the World Cup publicity wave by virtue of being major sponsors on the event. AMH’s volume rocketed by an amazing 85,2 per cent from 17 028 units sold in the first half of 2009 to 31 538 units retailed in the same period this year.
This result puts the AMH “renegades”, who continue to ignore requests to report detailed sales to Naamsa, in third position in terms of volume, behind only Toyota and Volkswagen, with a 13,4 per cent share of the market – a significant increase of 4,4 per cent over the situation a year ago.
The main reason for Volkswagen’s sales spurt is its passenger car ranges, where it increased its leading car market share from 22,3 per cent to 25,4 per cent as Toyota slipped 2,1 per cent from 20,1 per cent to 18 per cent due, to a large part, for its lack of an entry-level model, relatively high prices and aging volume models compared to some of its rivals.
The gap between the two leading protagonists, which had stood at 2 421 units at the end of June 2009 has now grown to almost 10 000 units.
Mercedes-Benz, supported by ongoing strong sales of its C-Class range not only retrained third place among car sales, but increased its penetration by 0,6 per cent to 10,8 per cent. Another luxury car maker, BMW, buoyed by its popular 3-Series line-up, overtook Ford to move into fourth spot with a 1 per cent improvement in share to 9,7 per cent, while the Silverton-based company lost 2,2 per cent in share and slipped closer to the clutches of its traditional rival, GMSA. The gap between the Blue Oval and the General shrunk from 3 439 to 1 269 units.
Nissan remained in seventh position as Renault moved up from 10th to eighth, at the expense of Honda, which dropped from eighth to ninth and Chrysler which fell from ninth to 11th, while Jaguar/Land Rover moved into 10th.
There were some major changes in terms of the ranking of the individual model ranges, even though the top two sellers remained the same, being the Volkswagen Polo hatch and saloon and the Toyota trio of Corolla/Verso/Auris.
The bottom has fallen out of the market for Toyota’s Yaris as it tumbled from third at the half year mark in 2009 to eighth at the end of June 2010, with its volume almost halved, principally due to price increases that have made many rivals more affordable.
Third place is now held by the Mercedes-Benz C-Class, but there is a new potential top seller in the form of the Volkswagen Polo Vivo, which is basically a renamed version of the previous-generation Polo that now serves as the Uitenhage company’s entry level model with the demise of the CitiGolf. Vivo was the fourth most popular car model despite only being introduced during the course of the first quarter of 2010.
The BMW 3-Series remained in fifth position with a slight improvement in share, while the Toyota Fortuner moved up from seventh to sixth as claimed stock shortages saw Ford’s Fiesta slip from sixth to seventh, only 12 units ahead of Yaris.
The Volkswagen Golf 6 almost trebled sales as it came in from the cold to ninth spot, ahead of the Nissan Sandero. Three models no longer in the top 10 were the Chevrolet Aveo, Honda Jazz and Nissan Livina.
Commercial market
As mentioned earlier, the LCV market also showed an improvement, with Toyota continuing its long-running dominance, shifting up a gear as it moved up its share by 1,3 per cent to 39,1 per cent, from selling 24 206 units, which was almost double the volume sold by second-placed GMSA that shed 2,3 per cent of its market share.
Nissan was the shining light in terms of improved sales, ousting Ford from third place as its share of the LCV market grew by an impressive 3,7 per cent, mainly on the back of better sales of the half-ton NP200.
Mercedes-Benz, which continues to battle to get any worthwhile volume from its Mitsubishi Triton one-ton pickups, remained in fifth position.
Volkswagen, which is putting great store by its upcoming Amarok one-tonner and possible half-tonner and minibus taxi additions to its LCV range as it prepares to challenge Toyota for overall market leadership, is still trailing by a huge margin, after selling only 1 023 light commercials (1,7 per cent of the market) in the first six months of 2010, to hold onto sixth place in the rankings.
Tata moved up from ninth to seventh in the period under review, as Fiat dropped from seventh to eighth and Mahindra fell from eighth to ninth, with Chinese mini-truck Chana returning to the top 10.
In terms of individual LCV model ranges it is the Toyota Hilux that continues to lead the way, with a 3 per cent improvement in share to a dominant 26,1 per cent from sales of 16 155 units.
The runner-up in terms of LCV sales is the half-ton Corsa Utility that has recently undergone a name change from Opel to Chevrolet in terms of GMSA’s product realignment programme. The Toyota Quantum continues to sell well despite a slowdown in government support for its long drawn out taxi recapitalisation programme and this minibus and panel van range remained in third position, ahead of the Isuzu KB one-ton pick-up from GMSA.
Nissan saw its NP300 Hardbody and NP200 half-tonner both move up a place, going to fifth and sixth respectively, as Ford’s Bantam slumped from fifth to seventh, ahead of its Ford Ranger and Mazda BT-50 stablemates. The Nissan Navara replaced the Mitsubishi Triton at the bottom of the top 10 list and is another bakkie that is battling to build a volume base, in contrast to the ongoing sales success of the long-running NP300 (Hardbody).
The medium truck market, which has its main application in urban deliveries, continues to disappoint, with a year-on-year drop of 1,9 per cent when the general consensus would have been some good sales in the first half of the year, driven by World Cup service provider projects.
The battle for supremacy in the medium commercial vehicle segment continues unabated between the Hino 300 Series (formerly known as the Toyota Dyna) and the Mercedes-Benz Sprinter. The former, which has been the long-time leader in this category, finished the half year only 10 units ahead of its rival – 852 vs 842 units – as the Sprinter’s, market share jumped by 5,4 per cent to 22,2 per cent, while Hino lost 0,9 per cent when compared with the situation a year previously and dropped to 22,4 per cent.
Isuzu, with its new N-series, continues to gain market and strengthened its hold on third position as share improved by 2,8 per cent to 16,4 per cent. The Volkswagen Crafter overtook Nissan Diesel’s UD35 and UD40 for fourth place as the latter underwent a model change and suffered severe stock shortages, slipping down to ninth on the top-sellers’ list.
Tata reported a jump; of 3,8 per cent in penetration and moved up from eighth to fifth, while the Mitsubishi Fuso remained in sixth spot despite shedding 0,8 per cent in share. Iveco, which has just added the Chinese-built Power Daily midibus to its range, improved its share by 3,1 per cent and moved up from ninth to seventh, with Nissan’s Interstar and Cabstar going from seventh to eighth, well ahead of the UD models, while the top 10 medium commercial list was completed by the Peugeot Boxer.
One battle that Hino lost was in the heavy truck category, where its 500 Series shed 9,4 per cent in market share and was overtaken by Nissan Diesel’s wide range of UD models, which gained 2,2 per cent in share, taking it to 24,2 per cent of a segment dominated by the Japanese truck makers.
Isuzu, which suffered a stock shortage earlier this year as its F-Series line-up underwent a full model change, lost 5,1 per cent in penetration, but still managed to hold onto third spot, despite fourth-placed Fuso improving its share by a massive 8,7 per cent. This put the Japanese truck well ahead of Tata, with the Mercedes-Benz Atego and MAN’s CLA and TGM models filling sixth and seventh positions respectively.
In contrast to the Japanese-dominated heavy truck segment, the extra-heavy category is the stamping ground of European and American manufacturers. Mercedes-Benz SA, with its Actros and Axor models, continues to set the pace at the top end of the truck market, although it lost 3,5 per cent in share as it went down to 19,7 per cent, but was still comfortably ahead of its main rival, MAN, which is on 12,5 per cent with sales of 474 units.
Volvo grew its share by 1,5 per cent to 11,6 per cent jumped up from fifth to third on the back of a 37 per cent increase in unit sales, thereby overtaking Freightliner and Nissan Diesel, which filled fourth and fifth spots respectively. Scania was another European company to improve its share, although it remained in sixth position on the top sellers’ chart. Its penetration improved by 1,1 per cent on the back of a 35 per cent increase in sales.
The fact that less than 100 units separated MAN in second place and sixth-placed Scania underlines the tight competition in this segment of the market.
Mercedes-Benz certainly put its stamp on the bus market in the first half of the year as it delivered several big World Cup-related orders to sell a total of 567 units for a 59,2 per cent share of this market, which was an improvement of no less than 45,4 per cent on the situation at the halfway mark in 2009. MAN, which had been the segment leader last year, slipped into second place as it lost 12,2 per cent in share, with unit sales just over a third of Mercedes-Benz’s volume.
Scania was in third position among bus makers after shedding 4,7 per cent in share, but well ahead of third-placed Volvo. The Volksbus, which is now part of the MAN stable, saw its unit sales drop from 61 in the first half of 2009 to only 11 for the first half of this year, although MAN say they see this fairly basic Brazilian-sourced bus as having good potential in African export markets.
It is interesting to see how the Japanese manufacturers, which are so dominant in the medium and heavy sectors of the South African truck market cannot make much of impression in the extra-heavy category and none of them compete in the local large bus market although they all have flourishing bus sales in the Japanese domestic market.
Hino continues to lead the way among the four Japanese protagonists in terms of total unit sales, but its volume dropped 15 per cent when comparing its performance in the first half of this year with the same period in 2009 – 1 434 units sold compared to 1 680 a year earlier.
Isuzu shed 2 per cent in volume in this period, while Nissan Diesel (soon to become UD Trucks) went from second to third on the Japanese list with a 24 per cent fall in volume due to the medium truck model change. Mitsubishi Fuso was the only one of the four to increase its sales, going up by 18 per cent from 513 units sold in the first half of 2009 to 606 retailed in the same period this year.
Outlook
As discussed in the introduction to this analytical article, it is very difficult to predict what will happen to the local motor industry and vehicle sales in the second half of 2010 as we may well hit the post-World Cup blues.
Naamsa expects the rate of sales growth to moderate in the next six months for an overall annual improvement of 15 per cent, while export sales are expected to grow by up to 30 per cent provided the global economy continues in a modest recovery phase and manages to avoid the feared “double dip” recession.
