Vehicle sales to bolster tracking firms

The National Automobile Association of SA (Naamsa) expects vehicle sales to start picking up this year, which will benefit tracking companies.

Last year was an abysmal one for vehicle sales, and sales of new vehicles ended on a “relatively weak note”, according to Naamsa's report on December sales. Total sales during the month were down 7.2%, compared to the last month of 2008.

Companies such as DigiCore, MiX Telematics and Altech Netstar were hard hit by the decline in new sales last year. Chris Gilmour, an analyst with Absa Investments, says 2010 should see vehicle sales improve on last year, which will spill over into improved sales for the tracking firms.

Naamsa executive manager Norman Lamprecht says domestic sales are expected to pick up 7% during 2010. However, the industry is coming out of a three-and-a-half year recession, during which sales dropped by half.

He says it will take until 2013 before the market gets back to levels it saw in 2006. Lamprecht says the association expects a slow growth trend supported by lower interest rates and growing consumer confidence.

New car and commercial vehicle sales have, since the middle of last year, started to show signs of bottoming out, although this is off a low base, adds Naamsa. Gilmour explains that the declines in sales are starting to slow, but the improvement in sales is not expected to be a sharp upward trend.

“During 2009, as had been the case throughout 2008, most sectors of the South African automotive industry continued to be confronted with severe profitability and sustainability challenges,” says Naamsa.

The economic crisis spilled over into the automotive parts production sector and several companies had to retrench staff, points out Naamsa.

However, the market is expected to recover, with sales this year expected to be 32% higher than last year on the back of exports. Domestic sales are also expected to recover, says Naamsa.

“The cumulative 5% decline in interest rates between end 2008 and August 2009 should improve the financial position of households and contribute towards an underlying improvement in the growth of vehicle sales in coming months,” explains Naamsa. In addition, the 2010 Soccer World Cup event is expected to boost demand within the car rental industry.

As a result, the general outlook for domestic sales for 2010 is for a slow improvement in demand as the economy slowly recovers from recession, the association says.