Fresh layoffs loom as new car sales crash to a four-year low

Bob Kernohan

NEW vehicle sales crashed to a four- year low in South Africa last year, their most dramatic plunge ever in percentage terms. Releasing its full-year and December sales figures yesterday, the National Association of Automobile Manufacturers (Naamsa) said an already poor year ended on a “dismally weak note”. The industry umbrella body said new vehicle sales in December – including those not reported in detail to Naamsa – dropped to 32765, which it described as “a massive decline” of 12162 vehicles – or 27,1 per cent compared to 44927 in the same month in 2007.

That meant that for 2008 as a whole, new vehicle sales fell 20,3% across all categories to 488951. Compared to 612708 units sold in 2007, it represents the lowest annual sales level since 2004.

But there was also some cheering news on the export front, with totals having risen from 179859 in 2006 to 284213 last year – an increase over four years of 58%.

On a market segment basis, sales in December (except for the small-volume bus sector) registered sharp declines on December 2007 in every segment.

Eastern Cape vehicle manufacturers enjoyed some satisfaction among the overall gloomy scenario, with Uitenhage-based Volkswagen SA capturing the top share (25,5%) of the passenger car market with its December sales of 5335.

In the case of General Motors SA, the Port Elizabeth-based company‘s market share for 2008 grew by 0,4%, while its locally built Opel Corsa bakkie remained its segment market leader for the 44th month in a row.

But the star of the year was Toyota, whose exports and local sales dominated throughout 2008 and whose sales volumes for December totalled 20508, well ahead of second-placed VWSA with its total of 6860.

On combined exports and domestic sales, Ford SA were third in December with 5183 sales, GM fourth and East London-based manufacturer Mercedes-Benz fifth on 4107.

Summing up 2008, Naamsa said it was clear sales had reflected a domestic market under severe pressure – particularly the new car and light commercial sectors.

However, “in sharp contrast, export sales continued to perform exceptionally well, which in turn provided support to South African vehicle and component producers”.

Another area “where there were signs of some momentum was in the used vehicle market, which continued to offer value and provide some relief to the automotive retail and distributive trade”.

Despite some positives on the horizon, like further drops in the interest rate, both domestic sales and exports were expected to decline further this year, although the market should improve in the second half, said Naamsa.

It forecast total domestic sales at 500000, a decline of 6,2% over 2008 figures of 533327 and 30% below the record 714325 in 2006.

Naamsa‘s advice to manufacturers, component makers, dealers and employees on how to weather the still stormy times ahead is that “all stakeholders will have to continue to focus on improving efficiencies in terms of production costs, service delivery and customer fulfillment”.

One of the first executives to comment on the market was VWSA sales and marketing director Mike Glendinning, who said 2008 had been “one of the most difficult years on record for the new passenger car market”.

But the company was nevertheless pleased that the its Polo/Classic range had captured “the title of South Africa‘s top-selling passenger car for 2008, with 29476 sold last year”.

He added: “Going forward, despite the good news for consumers as the inflation cycle peaked, interest rates were reduced in December and the price of petrol came down sharply (this week), 2009 promises to be another tough year for the new passenger car market.”

His most optimistic call was that there could be “some recovery late in 2009 and into 2010”.

GMSA sales and marketing vice-president Malcolm Gauld said about 10000 fewer vehicles a month were sold last year when compared to 2007.

“Reduced dealer throughputs had several dramatic results for the local motor industry,” he said.

“Innumerable jobs were lost as volumes fell, dozens of marginal dealerships closed doors, product lines were rationalised and even a complete brand ceased trading,” said Gauld.

Nevertheless, he added, manufacturers like GMSA appeared “to have weathered the storm better than those with narrower product portfolios”.

Gauld said the company had increased its 2008 market share to 13,8% – up 0,4% from 2007.

However, GMSA‘s 2008 sales of 67261 units were down about 18% from the 2007 volume of 82358, although that was less than the overall industry decrease of about 20,2%.

On the year ahead, Gauld said: “We anticipate a tough 2009 with further rationalisation and pricing unavoidable”.

The company expected the economy and new vehicle sales to recover from “late 2009 or early 2010”.