WesBank forecasts decline in new vehicle sales

Image supplied by motorpress.co.za

Chris de Kock, WesBank CEO, delivered the bank’s view of the market and its annual sales prediction at the 2019 Cars.co.za Consumer Awards in Midrand, Gauteng.

“It is quite comforting to know that we were very close with our 2018 forecast, despite a tough year. Our prediction for total new vehicle sales was just 1.7% lower than the market’s actual performance,” said de Kock.

“Looking at the 2018 performance, we know it was the result of a sharp sales decline in the passenger segment. This was starkly evident in the dealer channel, where the majority of buying activity takes place.”

South African consumers have become prudent with their personal financial planning, thanks to erratic fuel prices and high inflation – both dictated by the exchange rate. This is evident in buying patterns, with data showing consumers either delaying purchases or buying downwards, moving out of the premium market and into the mainstream segments.

With a remit to target inflation rates, the Reserve Bank has responded by slowly increasing interest rates which has put further pressure on household budgets. WesBank anticipates further minor increases in the medium term, a factor that will influence both consumer and business confidence.

An increase in the car rental market expected

This year, hope for the motor industry comes in the form of more lenient visa rules for tourists. This is expected to boost travel and tourism, which will be welcome news for the rental market. Alleviated drought conditions in Cape Town are also likely to have a positive impact on this market, especially with an anticipated increase in domestic business travel. Despite this, WesBank predicts that overall sales of passenger vehicles will decline 1.5% in 2019.

Motor manufacturers are under pressure around the world, with a global decline expected. Locally, dealers and manufacturers will no longer be able to offer lucrative marketing incentives to aid sales. In the short term, this will likely result in sales remaining flat.

Politics are also anticipated to play a role in the performance of vehicle sales, as tenders for fleet contracts are put on hold in the run-up to the 2019 national elections, in May. Business should resume to normal levels in the second half of the year, as the government focuses on its service delivery efforts.

Given the above, WesBank forecasts growth of 0.3% for light commercial vehicle sales and 1.7% for medium commercial vehicle sales. Heavy commercial vehicle sales are predicted to decline by 4.4% in 2019.

“With little in the way of economic stimulation on the horizon and a slump in the global economy, a one per cent decline in year-on-year sales is our forecast for 2019. We remain optimistic; however, it is challenging to predict which way the tide will turn following the elections,” said de Kock.