Uncategorized 30.8.2014 11:00 am

Abil hangover to hit car sales

FILE PICTURE: African Bank. (Photo by Gallo Images / Foto24 / Theana Breugem)

FILE PICTURE: African Bank. (Photo by Gallo Images / Foto24 / Theana Breugem)

Car buyers will have to struggle harder to access car finance in the wake of African Bank’s collapse as broader lending criteria tighten, says Dr Johan van Zyl, president and chief executive of Toyota SA Motors.

That in turn could limit liquidity and shrink sales turnover as banks glance nervously over their shoulders at ratings agencies hovering in downgrade mood over the local banking scene.

“So I think there will be a little bit more of a squeeze on liquidity, which will of course put a damper on markets,” Van Zyl says.

Van Zyl adds that much of the liquidity from the unsecured lending sector channels into consumer goods sales and, if the consumer sectors perform well, then their employees in turn can afford to buy cars.

So he expects an indirect impact on new car sales.

The rand’s depreciation and the related increase in new-vehicle price inflation, is also squeezing car buyers into the used-car market.

This could mute the impact of a reduction in liquidity, says Calvyn Hamman, senior vice-president of sales and marketing at Toyota.

New vehicles have been under pressure in the past few months as a result of subdued economic growth, a rising interest rate cycle, a surge in new-vehicle prices and subdued consumer confidence.

Van Zyl expects 630 000 new vehicles will be sold this year.

This is about 3% less than the 651 000 vehicles sold in 2013.

Hamman says all indicators suggest next year will be even more difficult, with expected sales of 610 000.

Van Zyl stresses though that the cycle is not all “doom and gloom”.

Exports should start to pick up as more manufacturers ramp up production of new models, although some regulatory changes will put a damper on exports to the rest of Africa.

Van Zyl says a support programme in Algeria for entrepreneurs to purchase especially light commercial vehicles has been adjusted to focus on housing.

In Nigeria, import tariffs have nearly doubled.

This increase will be passed on to the market price and will have an impact on sales and volumes.

An increasing number of emerging markets are also looking to industrialise their economies and Toyota would evaluate each country on its merit to determine if it is viable to produce there, Van Zyl says.

It will be studying the Nigerian market in particular in this regard, he adds.

Van Zyl says fundamental change is needed to solve the national strike fever that has dented South Africa’s credibility as a reliable manufacturer and exporter.

This would entail reviewing labour legislation and timelines around how long a strike can last, decision-making processes to strike and the arbitration process, among other things.

While commentators have warned that the manufacturing industry will turn to automation if labour issues can’t be resolved, Andrew Kirby, senior vice-president of corporate administration at Toyota, says automation is not a “silver bullet”.

“When you have a strike and people are not available the fact that you have 90% automation makes no difference. You still stop production,” Van Zyl says.

 

 

 

 

 

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