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2018’s Lessons from a tough 2017

The past year – 2017 – once again demonstrated the resilience of the South African automotive market and its consumers.

The automotive market is often considered a lead indicator of impending uncertain economic times yet, despite tough trading conditions, new vehicle sales in 2017 still ended the year up by 1.8%, according to Naamsa.

WesBank’s Ghana Msibi, Executive Head of Sales and Marketing, shares his insights into why the automotive market continues to buck trends, and what this means for those considering vehicle purchases in 2018.

Economically, 2018 has already started on a better footing than 2017.

automotive market analyst

The rand is stronger than it was a year ago, inflation is consistently tracking within the target band, and all the signs indicate 2018 will present more ideal conditions for those looking to purchase new or used vehicles. There are a few looming clouds, particularly the policy uncertainty around a number of pronouncements made at the ANC’s elective conference in December 2017, which remain as South Africa’s leadership undergoes transition. The country’s leaders’ decisions on these policy items have the potential to negatively impact sentiment, Msibi cautions.

“Notwithstanding the uncertainty, it is reassuring that the automotive industry has found creative ways to survive the tumult of 2017,” Msibi continues. “It has done this by introducing efficiencies that encourage more dealers to adopt targeted marketing strategies tailored to their customers’ digital needs. Dealers also recognise the need to harness technology and aggressive pricing structures to ensure they extend the dealership beyond the traditional brick-and-mortar structure to remain competitive. Similarly, we see a smarter balance between the kind of dealer stock kept, and the quality of these offerings, with a fine line being tread between new and used, as well as budget and more luxurious options.”

Treating Customers Fairly, the regulatory intervention introduced by the Financial Services Board in 2014, has led to greater transparency in the market and – as a result – customers who are better informed about their rights as consumers and the options available to them. “Thanks to these developments, the market is better positioned to appreciate the firmer currency and lower interest rates in 2018, while all data available to WesBank indicates the industry as a whole is not strained,” Msibi says.

2017’s lessons lead to stronger 2018

WesBank’s data shows that consumer price inflation (or CPI, which tracks the rate of change in the prices of goods and services purchased by consumers) and the rand/dollar exchange rate has traditionally had an impact on the numbers reported each month by Naamsa. The bank’s data for new car and used vehicle finance applications are up year-on-year between January 2017 and January 2018, which indicates an increased appetite among consumers who have been displaying some restraint in making big-ticket purchases.

“We envisage that the automotive market will display even more variety, which means consumers can prepare to be spoiled for choice as manufacturers and importers supplement the market with exciting new product lines.”

“In our view, the motor industry is very resilient and has previously shown it can survive tougher times, such as the recession of 2008.”

“This year, we are expecting the stronger currency and lower inflation, more efficient processes driven by consumer demand for digital solutions to their vehicle-purchasing exercises, positive GDP growth, and a renewed political landscape to contribute to a positive and more robust market environment for consumers and businesses in 2018 and beyond,” Msibi concludes.

Tristan Wiggill
Special Features Editor at Business Fleet Africa