FleetWatch Online - 78-NaamsaFeb06

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Past Issues

April 2006

Figures, analysis and comment supplied quarterly by
Richard Proctor-Sims

Q1 2006 over Q1 2005 sales increase by a huge 27% -
by Richard Proctor-Sims

IN THE face of most predictions, including our own as well as that of Naamsa – the vehicle industry’s representative body – sales of all new vehicles in the first quarter of 2006 were almost 27% higher than those for the equivalent 2005 quarter. This increase is in the same ball park as the Q1 2005/Q1 2004 or the full year 2005/2004 increases (28% and 32% respectively). A Q1/Q1 increase closer to 10%, indicating a market correction, had been widely expected.

Table A summarises the first quarter performances of all the new vehicle market sectors for 2004, 2005 and 2006. If the present average rate of increase were sustained, the size of the overall market would double in less than the four years to 2008, compared with the five years previously indicated.

Table A. First Quarter and index comparisons for new vehicle sales in 2004, 2005 and 2006
	Q1 2004		Q1 2005		Q1 2006
Cars	69 842	*100*	85 983	*123*	103 175	149
LCVs	30 702	*100*	35 687	*116*	44 137	144
MCVs	1 697	*100*	2 448	*144*	3 150	186
HCVs	2 589	*100*	3 806	*126*	4 379	146
M/HCVs	4 286	*100*	5 472	*128*	6 936	162
Total market	104 830	*100*	127 081	*121*	155 272	148

The higher growth rate of the MCV sector – and the consequential growth of combined M/HCVs – is clear from this presentation.

In the numbered tables which follow, it will be seen that after little more than two years in this country, Tata has joined the market leaders. It now leads the MCV table (Table 2), is third in the heavy truck table (Table 3), fifth for extra-heavy trucks (Table 4) and third in the overall table (Table 1).

While it may be natural for some competitors to suggest to always eager ears "that the newcomer is pricing unrealistically" or "that its parts availability is poor and parts prices high" or even "that its countrywide support and service will not be sustainable", it is incontrovertible that Tata has invigorated the market. It is also fair to speculate that the market surge over the past two years would have been less dramatic without Tata’s presence.

All the recent positive trends are still in place for new vehicle sales to remain buoyant: • business confidence and GDP growth remain high

tax, interest and exchange rates are stable
vehicle prices are increasingly more affordable
there are increasing levels of tender and other work

Equally important is the competition within the transport and logistics industry today, which demands both shorter first-use vehicle cycles for the premium haulers and distributors and access to continually improving fuel and other technologies for all the players who are determined to survive. Some might regret the change but transport has now moved well and truly out the ambit of truckers and into the boardroom.

With no squalls visible, the present sales patterns should continue for at least the next quarter. As for the remainder of 2006, who knows? Most vehicle manufacturer CEOs and their teams have so far been able to manage their inventory levels – no mean feat – and it now seems possible to suggest that they may be setting their sights on a year-on-year growth of between 17% and 22%.

Comment:
The colour entries in this and the other tables indicate players whose year-onyear increases are higher than average. Of the established players, MAN, Tyco, Iveco and Volkswagen have started the year on a high note, though none have experienced Tata’s spectacular growth. Volvo’s performance was marred by a nil sales return for trucks in March. Only time will tell whether this is an error. Market leader DaimlerChrysler has made a hesitant start, which both Toyota/Hino and Tata looking threatening. Sales by General Motors, Scania and, to a lesser extent, Nissan Diesel and Toyota/Hino underperformed compared with the rest of the market. Nissan’s entry into the MCV market in competition with its close relative Nissan Diesel means that 17 manufacturers, assemblers and importers are now represented in the total truck and bus market in Southern Africa, with half-a-dozen additional marques.

Comment:
Not long ago, this vehicle category had half-a-dozen main competitors, with Mercedes-Benz and Iveco accounting for most van sales and Toyota, Nissan Diesel and Isuzu most truck sales. How different is the picture today, with twice as many players and Tata in the lead with more than 24% of total sales. Iveco appears to be climbing out of its recent hole, but, of the current sales of major players Mercedes- Benz, Isuzu and even Toyota and Nissan Diesel have been disappointing.

Comment:
Although their contributions were relatively minor, only MAN, Fuso and Iveco joined Tata in achieving above-average first-quarter growth. Isuzu and Mercedes- Benz again disappointed. Unusually, the growth rate of this sector was the highest for the industry in the quarter under review.

Comment:
The "redness" of this table is balanced by Q1 2006 sales returns from no fewer than five established players – Isuzu, Volvo, Mercedes-Benz, Scania and Nissan Diesel – that were lower than Q1 2005. This could be a worrying development. From not being represented in this weight category a year ago, Tata is already in fifth position, with the possibility of climbing still higher.

Comment:
Only five players have sold bus and coach chassis so far this year, with Nissan Diesel, Volkswagen and Iveco – all in last year’s table – so far unrepresented. No significance need be attached to the apparently high first-quarter sales increase or, except for MAN’s first position, in the present ranking of the other main players. The fourth quarter is usually best for bus sales and anyway, as often said in this column, bus sales will remain small beer until the South African government gets to grips with South Africa’s public transport realities.

The tables refer to Naamsa members’ sales of new trucks and buses in South Africa, Botswana, Lesotho, Namibia and Swaziland _ the five countries of the Southern African Customs Union (Sacu). New truck and bus sales by non-members of Naamsa are not significant.