Economist predicts expanding sales, tougher competition

ED RICHARDSON COMPETITION IS expected to get tougher as the year progresses, says one of the country’s top motor industry economists, Dr Neal Bruton of Response Group Trendline. He expects sales to keep expanding. The market started growing in 2003, and has since been showing consistent growth. According to Bruton, there is evidence that the South African market has moved away from its dependence on fleet sales, with the arrival of the private buyer in the market. Dealers accounted for an average of 80% of new passenger car sales in 2005. “It is easy to see the reasons for this. With the rise in house prices, the lowest interest rates in 25 years, a booming stock market and a highly aggressive and competitive new car trading market, consumers and companies have not had it this good for a generation at least,” he says. According to Bruton, sales are being driven by a number of factors. “Prices have, in real terms, been dropping. More importantly, the perceived price of a new car has fallen sharply. At the beginning of 2003, a new house cost as much as 1.5 average passenger cars. By the end of December 2005, that ratio had moved to 3.3 cars to a house. “This has had two effects. The first is that it has pumped billions of rands of disposable income into the economy. People who have been in their houses for some time have taken out second bonds, have been able to buy new cars for each of the two children, and still have money left for improvements, a holiday or whatever. “Secondly, even first-time purchasers of new houses perceive the car repayments as a relatively small percentage of disposable income – compared to what it was five years ago.” Looking ahead, Bruton says there is a mixture of good and bad news. “We are predicting a 10% growth in new car sales. However, competition is going to get even tougher as more and more new models are introduced and the economy comes off the boil. There are definite signs of a slight slowdown – which is healthy as the economy cannot continue at the present rate.”