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Send  Share  RSS  Twitter  21 Jul 2010

MOTORING: SA Auto Market is Growing But Challenges Remain


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The global economy, South Africa included, has returned to a growth path in 2010, but it will take significant time for the automotive market to return to the levels experienced in 2006.

Speaking during Toyota’s annual mid-year briefing session held at their head office in Sandton on Thursday, 15 July, Dr. Johan van Zyl, President and CEO of Toyota South Africa Motors (TSAM) highlighted the fact that a high level of uncertainty remains on a global level. “On a global scale there is a mix of positive and negative news regarding the state of the economic recovery. We believe that the major economies will return to growth in 2010, but that this growth will be slow.”

On the South African front Van Zyl emphasised the importance of a structured industrial policy that supports the goal of “re-industrialising” the country. This, he says, is the cornerstone to sustained employment growth. As such Van Zyl lauded the planned Automotive Production and Development Plan (APDP) and its Automotive Investment Scheme (AIS) for its efforts to create a structured framework for future planning and capital investment. Van Zyl noted that members of the National Association of Automotive Manufacturers of South Africa (Naamsa) will aim to fully support the APDP through so-called linked sourcing, where any effort by one manufacturer to localise a component or its supplier will be supported by the other Naamsa members.

In a discussion of trends in the local vehicle market Andrew Kirby, Senior Vice President: Sales and Marketing at Toyota South Africa, noted that the company expects a 20% growth in the vehicle market in 2010. Given this growth figure, the market should reach a level of 475 000 units by the end of the year, although growth is expected to be slower than in the Soccer World Cup-driven first half of the year.

Kirby highlighted the SUV and so-called Sub-B segments as the key drivers for sales growth in the passenger vehicle market, with the ever popular bakkie the major performer in the light commercial market.

“It is encouraging to see that dealer sales were the biggest market driver in the first half of this year, followed closely by sales to vehicle rental companies. Increased sales through the dealer channel represent increased interest from private buyers and fleet customers, which is the core ingredient for sustainable market growth,” says Kirby.

Despite the positive trend in vehicle sales, Kirby emphasised that several challenges remain. He noted that the impending CO2 tax on passenger vehicles would lead to an average increase in vehicle prices of 2% and that the tax is more stringent than in developed markets such as Germany. “We have been vocal opponents of this new tax, as compliance requires better fuel quality than is available in South Africa. We have also questioned the effectiveness of this tax in changing buying behaviours, given the fact that many potential customers will only perceive it as an added cost.”

The proposed increase in company vehicle tax was another area that Kirby highlighted. A calculation of the increase in tax on a mid-range sedan showed that increasing this tax and calculating the vehicle value with tax included, as is proposed for 2011, will increase the monthly repayment cost by over 80%. This would significantly impact on financing behaviour in the company vehicle market.

In closing, Kirby pointed to the current growth in vehicle exports, which signal economic improvements in Toyota’s export markets. Emphasising the views of Van Zyl regarding the importance of growth in manufacturing, Kirby noted that local automotive manufacturers are still faced by overcapacity, which can only be addressed by growth in export sales.

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