Good news but no celebrations
According to information released by the National Association of Automobile Manufacturers of South Africa (NAAMSA), the first quarter of 2010 saw a 21,4% increase in the number of new cars sold on the domestic market over the corresponding period last year.
'Total industry vehicle sales have been in steady decline from the highs of 2006, when more than 714 000 units were sold, with 2009 recording a mere 395 000 units,' says Ledgerwood. 'While increases in 2010 are off a relatively low base, it's a clear indication that the automotive sector is slowly emerging from the grip of the recession and all those servicing the sector are beginning to breathe a long-overdue sigh of relief.'
Demand is driven by a number of factors. There has been a global improvement in both consumer and business confidence this year, and this, coupled with a cumulative 5,5% decline in local interest rates since 2008, has seen buyers return to the market as household finances improve. However on the international front the introduction last year of scrappage allowances by several countries has possibly skewed new car sales and once these incentives expire there is likely to be a significant drop in demand.
Locally, the imminent kickoff of the Soccer World Cup has also contributed to car rental companies increasing the size of their fleets in time for the almost 300 000 expected foreign visitors for the sporting extravaganza.
'The spike in production has caused challenges for some local component suppliers and, in some cases, availability of items has been problematic,' says Ledgerwood. 'The strengthening of the Rand against international currencies also disadvantages South African component manufacturers and, linked with the recent large increases in electricity costs, there's going to be increasing pressure to remain competitive. Organised labour is going to have to keep its salary demands in check against the myriad other increases this sector is facing.
'Confidence is returning but we aren't out of the woods just yet. The automotive sector is a global player and we're exposed to a wide range of external factors. The key to success is our ability to produce top-quality components at competitive prices in ever-increasing quantities, and every member of that production chain needs to fulfil their role at maximum efficiency.'