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Motoring: Vehicle Sales Confidence Shifts Out Of Reverse Gear

 





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The research indicates that decreasing interest rates, more stable fuel prices, better consumer confidence levels and a general better cost of living outlook are all factors that have aided a shift in the underlying momentum of the WVsCI. However, respondents still believe that bank approvals, new vehicle pricing and the current economic climate are the main drivers negatively affecting current activity levels on their showroom floors.

Encouragingly, while the outlook for the rest of 2009 will remain challenging, there is evidence that suggests a more positive outlook is indeed beginning to emerge.

Market beginning to show signs of recovery

New finance applications on the rise

Another indication of the improved underlying momentum in the market is the number of new applications received. WesBank has seen a noticeable increase in the number of applications during the previous quarter. Applications have been on the rise since April 2009 – having moved from approximately 60 000 applications to nearly 75 000 in July 2009. This activity in the market is encouraging and again illustrates better confidence levels.

Used vehicle market stabilises

For the first time in the last 18 months, WesBank’s new-to-used ratio has started to retract slightly, showing that the strength in the used vehicle market has stabilised and that the new vehicle market has started the long claw back to parity with used. Trends gleaned from the WesBank book indicates that currently 65% of vehicles financed are pre-owned compared to 69% for the previous months.

Despite this, the used vehicle market remains strong, with 81% of WVsCI respondents stating that the used vehicle market is more active than the new vehicle market. WesBank believes this continues to be a positive sign, as stability in the used vehicle market will eventually lead to recovery in the new vehicle market.

Outlook for the coming months

The latest findings from the WVsCI is as much a confidence builder for the Indicator as it is for the industry, as it anticipated a stabilisation of the market at the previous release in May. Three month confidence levels are predicted to be at 5.1, while 5.7 is said to be reached by the beginning of next year. Decreasing interest rates, better debt to service ratios, more stable fuel prices and the fact that the general market is showing some signs of recovery will all add to more positive consumer confidence levels as we near the end of 2009.

Although accessibility of credit remains the main factor that will influence the future outlook and confidence of the new vehicle sales market, it is not inconceivable to expect an improvement on this front as consumers continue to de-leverage their personal balance sheets and banks regain their appetite for credit. Finally, as previously stated, the used car market remains stronger than the new market – but signs are emerging that balance in this market will return in the near future. All of this is likely to be welcome news for the South African motor industry, as players from across the value chain continue to search for positive signs.


 
 
 
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