new-car crash

THE desperate state of the new vehicle market is clearly indicated by the number of vehicles sold each trading day which, last month, was lower than in February and March, and was similar to the shocking sales performance in the holiday-marred April figure.

The level of sales experienced last month - 34,7 percent lower than in the same month last year - were similar to those encountered in 2000, said Marcel de Klerk of Absa Vehicle and Asset Finance.

With the poor performance last month, the industry has sold about 88000 less vehicles this year than during the same period last year.

Sales of commercial vehicles, which have fallen by more than 50percent in the past year, reflected lower investment spending by the private sector, indicating that companies were having increasing difficulty in obtaining vehicle finance, said the National Association of Automobile Manufacturers of SA.

However, Naamsa expects some improvement in sales levels towards the end of this year, while export sales, down 41,3percent on May last year, could benefit from early positive signs of returning confidence in world markets.

But De Klerk said there was also evidence that fewer potential buyers were applying for loans, that more approved loans were being cancelled and consumers were switching to lower-priced or pre-owned cars.

Lower interest rates make only a modest reduction in monthly loan repayments, amounting to R350 on a R150000 car since rates started falling in December. It is more meaningful on a mortgage bond repayment - almost R2600 on a R700000 house.

Aggravating the problem had been increases in new vehicle prices, which have risen by 12percent in the past year.

Interest rate reductions generally take between 12 months and 18 months to have any effect on debt and to encourage spending again, said De Klerk.

He says he foresees further consolidation in the industry with more dealership closures as well as a sharing of infrastructure and technology between different brands, which will have an effect on component manufacturers.