Picture: REUTERS
Picture: REUTERS

THE year 2012 is probably one that motor industry sales and marketing executives in South Africa will look back on with some satisfaction.

It looks likely that the local market will have grown in the vicinity of 10% for the year, and while some had hoped for more, it’s unlikely many people will be unhappy with the result.

As Nissan MD Mike Whitfield has pointed out, the majority of the growth in the market has been in the entry-level segment, and 2012 was characterised by manufacturers and importers scrambling to ensure they had products in this area of the market.

The most recent entrant is Honda, which in December introduced the budget Brio (R120,000), built in India. Earlier in the year Toyota introduced the Etios (R116,000), also Indian-built, and have had tremendous success with it: the car sold more than 2,100 units in November alone.

These cars join perennial bestsellers the Uitenhage-built Volkswagen Polo Vivo (from as little as R108,000), South Africa’s best-selling passenger car, the Volkswagen Polo (also manufactured in Uitenhage) and Ford’s India-built Figo (R120,000).

Between them the entry-level segment makes up about a quarter of the total market, and given the ceaseless popularity of bakkies, SUVs and crossover vehicles, manufacturers of luxury cars have had a tougher time selling their product, with most manufacturers offering various incentive schemes to get buyers into their cars.

The success of 2012, commentators such as Wesbank sales and marketing head Chris de Kock have said, can be attributed to various factors — specifically very low price inflation for new vehicles as a result of intense competition.

Added to this, historically low interest rates have made financing options more attractive for buyers, as well as the ever-lengthening average payback period, now sitting at 34 months, with many new-car customers choosing to finance their cars over 72 months.

A shortage of used vehicle stock, and therefore higher prices, has also made entry-level new cars, with their various warranties and service plans, disproportionately more attractive.

Mr de Kock has warned that strong growth in new cars, therefore, should not be misread as signifying an unusually healthy consumer. Additionally, surprisingly strong growth in October and November could easily be attributed to the anticipation of price rises for new vehicles in the new year.

Mr de Kock said such inflation was already visible. "Prices have already started to increase, as evidenced by WesBank book data showing the average transaction value of new car purchases increased last month by 3.25% on average," he said in December.

Additionally, Wesbank’s most recent dealer confidence indicator suggested a disconnect between what was happening on the showroom floor, and other economic indicators dealer principals could see that point to tougher economic times ahead.

This would suggest that the last quarter of 2012 might represent something of an Indian summer for the local new-vehicle market, and that challenges lie in the road ahead.