There are two big questions on the lips of members of the SA motor industry, and unfortunately, there is no reliable source to provide the answer to these vexing questions…
By Roger Houghton
- When will we see an upturn in the economy that translates into an increase in new vehicle sales?
- Will we be affected by the “backwash” of what happens to our source companies?
These are very worrying questions which affect not only the lifeblood of companies, but the employment of many thousands of people. Already there have been substantial retrenchments in the SA vehicle manufacturing sector, with more to come, as well as large numbers of retrenchments and many company closures in the component manufacturing and automotive retail sectors.
More bad news came recently from the international ratings agency, Fitch Ratings, which says it expects the SA motor industry to come under increased pressure and did not expect a recovery in local market conditions before 2011. It expected new vehicle dealerships to be particularly affected by the economic slump.
Fitch ratings provide a relative measure of creditworthiness for rated entities, with the best risk in a country being rated AAA. Ratings of some SA motor companies, which are specific to this country, are: Mercedes-
Benz AA, the Bidvest Group, which owns McCarthy, rated A+/stable, Barloworld A+/ negative, Steinhoff International, which owns Unitrans, was A/negative and Super Group was rated BB/rating watch evolving.
The new vehicle sales figures for the first quarter of 2009 make for very depressing reading, with the total market down 34,2% year-on-year compared to the first quarter of 2008, with total retail sales (including non-reporters) of 101 907 units, compared to 154 830 for the same period a year earlier.
Passenger car sales were down 30% year-to-date, while sales of light commercial vehicles (LCVs) were down 39,3%, medium commercial vehicles (MCVs: 3 501 – 8 500kg GVM) were down 41,3%, heavy trucks (HCVs: 8 501 –
16 500kg) were down 37,8% and the extra-heavy truck segment (XHCVs: over
16 500kg), which had held up best of all the segments in the local market last year. Now collapsing by almost 50% (49,3% in fact), with big buses (over 8 501kg) tumbling 31,7%.
The companies that do not report detailed sales to NAAMSA – mainly the Imperial Group’s Associated Motor Holdings (AMH) – have also taken a big hit, with volumes down 37% year-on-year.
Admittedly there was an increase of 11.4% in overall March sales, compared to the previous month, but then March is generally a good sales month, but it was, still 30,3% below the figure for March 2008, which puts the sad situation into its true perspective.
The major contributing factors to the improvement of March over February were, according to industry commentators, some pre-price increase buying by both fleet and private customers as many vehicle prices went up on April 1, more working days in March, aggressive marketing incentives as dealers tried to qualify for first quarter sales incentives, while the reduction in the prime lending rate also impacted positively.
However, the continuing low sales figures for the year are indicative of a low level of business confidence, tougher lending criteria by the finance houses, a slowdown in economic activity as well as a cautious approach to capital expenditure.
As has been seen previously in economic downturns, established and trusted companies with a long history in the local market fare best. Toyota has maintained its 26,1% share of the total market (NAAMSA reporters) and in the month of March it went up to an even more dominant 28,7%. Toyota was also the leader in three of the six market segments – passenger cars, LCVs and MCVs.
The second-placed Volkswagen Group increased its overall market share from 13,7% to 14,6% to demonstrate the strength of its brand in these tough times.
The top 10 rankings on the overall sales chart has remained fairly static on a year-on-year comparison, with the first eight companies in the same positions, being: Toyota, Volkswagen, General Motors SA, Ford, Mercedes-Benz, Nissan, BMW and Honda.
Then come the changes. Tata, which was in ninth position at the end of the first quarter of 2008, has slipped to 12th. Ninth spot has been taken by Chrysler SA, which has embarked on a massive discounting programme, while 10th position, which was filled by Fiat at the end of March last year, is now occupied by Tata’s luxury subsidiary, Jaguar/Land Rover.
Amazingly, only 12 manufacturers or distributors of the 41 that report sales to NAAMSA have a share of 1% of more of the overall vehicle market in SA!
he battle for supremacy in the passenger car market between reigning champions Toyota and former titleholder Volkswagen is even closer than ever this year. VW has retained the 21,2% share it had at the end of the first quarter of 2008, but Toyota’s penetration has slipped from 24,2% to 21,7% in the past 12 months. The gap between the two protagonists that had been 2 616 units at the end of March 2008 has now shrunk to a slender 255 units in Toyota’s favour!
In this segment the first six positions are unchanged: Toyota, VW, Mercedes-Benz, Ford, BMW and GMSA. Nissan has been pushed down from seventh to eighth by Honda, with Chrysler moving from 10th to ninth, while Renault is in 10th and Jaguar/Land Rover fall from ninth to 11th.
In contrast to the comparatively stable overall rankings of the various manufacturers and distributors, there has been a big shake up in the ranks of the top selling individual passenger car model ranges.
At the end of the first quarter last year the top three – Toyota Yaris, VW Polo/Classic and Toyota Auris/Corolla/Verso – were bunched together in the top three spots, with only 259 units separating the No. 1 from the No. 3. This year the Polo/Classic has edged into the lead, 383 units ahead of the Corolla threesome, which was, in turn, 400 units ahead of the Yaris hatch/sedan range, meaning a spread of 783 units between No. 1 and No. 3.
Amazingly, in these tougher economic times, the luxury Mercedes-Benz C-Class has retained its fourth position, at a time when the cut-price VW CitiGolf has leapfrogged the BMW 3-Series for fifth spot. The popularity of the attractively-styled new Fiesta is evidenced by it coming from outside the top 10 a year ago to fill seventh position now, with the previous seventh place incumbent, the Opel Corsa, falling to No. 10 – probably due to losing sales to Fiesta.
The new Honda Jazz is another newcomer that has “come in from the cold” to take eighth position, which was held previously by the Toyota Avanza. The latter is now down in ninth position, ahead of Corsa.
The Fortuner continues to lead the way in the SUV market, but its sales have almost halved in the past year, going from 2 207 in the first three months of 2008 to 842 in the same period this year, admittedly with a model run-out and facelift model introduction in this period.
However, Toyota’s other SUV and the model that established the “soft-roader” market, the RAV4, has seen its sales tumble from 260 in the first quarter of 2008 to only 95 units a year later, leading to a recent “repositioning” with a substantial price cut for the “entry level” model.
The LCV market has seen substantial bloodletting in the past year, with sales down almost 40%. This is a market where the strength of the Toyota brand is evident, with its segment share moving up from 31,6% to 37,2% on the back of strong sales from both the facelifted Hilux and the Quantum people-mover, with the latter overtaking both the Isuzu KB and Corsa Utility to take second place behind Hilux on the top-sellers’ list.
GMSA maintained its second place in the market with a share of almost 27%, with Ford in third place, albeit with a 3,9% fall in share. Nissan fared better in terms of share, going up 2,7% to 12,9% to stay well ahead of MBSA (down 1.3% to 4.4% on sales of 1 223 units). Next best was VW with 517 units sold.
The medium commercial vehicle market (3 501 – 8 500kg GVM) is another segment that has seen a steep downturn in sales. Here again Toyota’s truck division, which has been renamed Hino, has maintained its leadership position with an increased market share, going up from 22,2% to 23,7%, while its closest rival, Mercedes-Benz Sprinter shed 1% to 18.4%.
Isuzu, with its new N-Series model range, has made a big stride up the ranks, going from fifth place to third, with a 4.3% improvement in share. (Isuzu was, in fact the shining star in the overall truck market at the end of the past quarter, as its sales rose 35% in the first quarter of 2009 compared to the same period a year ago).
The new Volkswagen Crafter is another MCV model proving popular as it bounced up from eighth a year ago to fourth, demoting Nissan Diesel (5th to 4th) and Iveco (5th to 9th). Mitsubishi Fuso jumped from ninth to sixth. Nissan itself remained in seventh spot, despite losing 1,5% in share, while Tata was the big loser, tumbling down from third to eighth, losing nearly 70% in sales volume and 4,7% in penetration.
There has been a big shake-up in the heavy truck market (8 501 – 16 500kg GVM), with Isuzu Trucks leaping to the top of the first quarter sales table with 29.9% of the segment, which equates to growth of an impressive 11.7%. The previous segment leader, the Hino 500 Series, lost 0.7% in share to go down to 27,2%.
Third-placed Nissan Diesel was another to gain share, going up 3,7% to 22,3% meaning that the three Japanese companies Isuzu, Hino and Nissan Diesel controlled almost 70% of the market for this period! The biggest loser was again Tata, shedding 8,5% as its penetration slipped from 14,3% to 5,8%.
Extra-heavy trucks was the best-performing segment in the falling SA new vehicle market last year, but it has fallen like a stone in the first three months of 2008, with sales almost halved in the same period of 2009; 1 748 units sold vs 3 445 a year previously.
Long-time XHCV pace-setter, Mercedes-Benz, grew its share 1,2% to 20,1%, while second-placed Nissan Diesel slipped slightly (down 1,1%) and there was a switch in the third and fourth place companies, with MAN leapfrogging Freightliner.
Scania, with increased production capacity and a new model line-up, grew its share by 6,1% as it jumped from eighth to fifth, with Volvo dropping from fifth to sixth, which was occupied previously by Tata, and Navistar ousting Hino from seventh spot.
The local bus manufacturers have been frustrated for months by the tardy awarding of tenders for the BRT, Confederation’s Cup and World Cup requirements and their sales have in fact fallen at a time they were expecting a boom. Sales of buses over 8 501kg GVM for the first three months of this year, stood at 151 units, was actually 35% lower than for the same period last year.
MAN has retained its top position, while Iveco, which had been in second place at the end of March last year, with 55 units sold, was second from bottom this time, with only three units sold.
Interestingly, relative newcomer VW Heavy Commercials’ Volksbus is now in second place, ahead of Mercedes-Benz and Scania. At the end of the first quarter last year the order had been: MAN, Iveco, Volkswagen, Mercedes-Benz and Scania.
The outlook for all sectors of the SA motor industry going forward does not look too bright.
The global economic slowdown is expected to impact negatively on the important SA automotive industry exports of both built-up vehicles and components in 2009.
NAAMSA expects the overall domestic sales and production levels in 2009 to fall to the lowest levels in seven years, with the automotive export business expected to remain under pressure through 2011.
NAAMSA is predicting a fall in 35,8% in vehicle exports to 182 500 units, but if this target figure is reached it will still be the second highest export total in SA history after last year’s 284 211 units. The problem is that the original projection for 2009 was export growth, not a decline!
Total vehicle production for this year is forecast at 415 500 units, which will bring it back to pre-2003 levels.
NAAMSA’s forecasts for the total market and various segments in 2009 (with 2008 actuals in parentheses) are: Total market – 448 000 (533 387), passenger cars – 270 000 (329 262), LCVs – 145 000 (169 466), MCV/HCV and XHCV – 33 000 (34 659).
A glimmer of light for the future is that projected capital expenditure by the industry this year of R3,67-billion is bigger than the figure for 2008 and the second highest in history.
Another positive fact was the improvement in the industry’s overall trade balance last year. Preliminary data shows that combined 2008 component and vehicle export revenue reached R93-billion, contributing to a much better overall trade balance for the industry, which declined to a deficit of R4,5-billion, compared to a deficit of R36,4-billion in 2007.
However, as we always say in these difficult and unpredictable times: Only time will tell!
