FleetWatch Online - 78-NaamsaAug06

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Past Issues

August 2006

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

Despite a 22% growth rate, the end of the
long bull run may be in sight
by Richard Proctor-Sims

WHILE quarter-on-quarter sales for Q2 2006/2005 continued to grow, there was a slowdown compared with the unexpectedly strong Q1/Q1 return, which saw an increase in the medium and heavy vehicle (M/HCV) sector of the market of no less than 27%. Q2/Q2 came in at 17%, to make the average growth for the first half of this year 22% higher than the total for the first six months of 2005.

While perhaps too soon for an accurate prediction to be suggested, the signs are that sales for the full 2006 year may be no higher than the 10-12% increase for calendar 2005 widely projected at the end of 2005.

The rationale for this possibility will continue to be analysed after Tables A-C, which may provide some useful pointers.

Table A shows the relative strength of the sales of all the new vehicle categories (including cars and light commercials) in the first half of 2006 compared with the same period in 2005. The strongest sector was heavy commercials (HCVs), while the weakest was light commercials (LCVs).

Table A. Sales of new vehicles in Southern Africa by Naamsa members for the first half of 2005 and 2006
	2005 (first six months)	2006 (first six months)	Change
Cars	175 207	208 175	+18.8%
LCVs	75 746	86 841	+14.6%
MCVs	5 689	6 718	+18.1%
HCVs	6 830	8 546	+24.5%
Total market	263 472	310 280	+17.8%

Table B shows the Q1/Q1 and Q2/Q2 results for 2005 and 2006 in units and indices for the four sectors of the M/HCV market. The slowdown in growth is immediately apparent. The extraheavy sector performed best in these Q2 comparisons, with MCVs losing some of their first-quarter growth.

Table B. First and second quarter 2005 and 2006 unit sales and indices for the medium and heavy commercial market (100 = the 2005 quarters)
	2005 Q1		2006 Q1		2005 Q2		2006 Q2
MCVs	2 448	100	3 135	129	3 243	*100*	3 568	*110*
Heavy trucks	991	100	1 471	148	1 332	*100*	1 598	*120*
Extra heavies	1 858	100	2 065	111	2 200	*100*	2 859	*130*
Buses	175	100	250	143	274	*100*	303	*111*
M/HCV totals	5 472	100	6 936	127	7 049	*100*	8 328	*117*

Table C illustrates the cyclical nature of the market, with the four most recent quarters providing the examples. The third quarter of 2005 was stronger than both the fourth quarter of 2005 and the first quarter of 2006, being overtaken only by the second quarter of 2006. For the remainder of this year, the challenge in the third quarter will be to improve on the already strong performance in Q3/2005. In this context, the strength of Q1/2006 vis-à-vis Q1/2005 is, in fact, a weakness if the comparison were to be made with Q3 and Q4/2005. It will be interesting in three months’ time to see the extent of the Q3 improvement in 2006 over the comparable 2005 period.

Table C. Unit sales and indices for the past three quarters (100 = Q3/2005)
	2005 Q3		2006 Q4		2005 Q1		2006 Q2
MCVs	3 243	100	3 315	102	3 150	97	3 568	110
Heavy trucks	1 555	100	1 298	83	1 471	95	1 598	103
Extra heavies	2 535	100	2 360	93	2 065	81	2 859	113
Buses	292	100	293	100	250	86	303	104
M/HCV totals	7 622	100	7 266	95	6 936	91	8 328	109

While these three tables help our appreciation of the dynamics of the current market, they should not be allowed to cloud the main picture, which shows that the region’s new heavy commercial vehicle market is experiencing record highs.

The slowdown has, however, also become clear. Its main influences have been, and for the time will continue to be, the weaker trend of the rand against other major currencies, which is hardening a range of vehicle and other prices and thus reducing the capacity to invest; and the increasing cost of fuels and lubricants, both in absolute and exchange-rate terms, which is increasing operating costs and decreasing margins for fixed-priced contracts.

In the numbered tables which follow, Tata again emerges as the star performer. In a time-frame that most newcomers would need to establish no more than a toehold in the market, this Indian-based company continues to confound its competitors. It now holds first, second, third and fifth positions respectively in Tables 2, 1, 3 and 5. This company’s achievement in overtaking Toyota/Hino to take second position in the Southern African market in less than three years is nothing short of remarkable given the Japanese company’s long experience in our market, its strong ties with South African entrepreneurs and customers, and its formidable dealer network.

Comment:
The colour entries in this and the other tables indicate players whose year-onyear increases are higher than average. Of the established players, Iveco, Tyco and MAN continued their strong performances, though none have shared in Tata’s spectacular growth. None of the other companies manage to equal the average growth of the market. Volvo, previously a tower of strength in the heavy truck market, finds itself in the bottom third of the table and, at present, a serious competitor only in the large bus market.

Comment:
In this table, Tata has actually lost ground compared with the first quarter, with its market share dropping from 24% to 21%. Iveco, of the established players, as well as Volkswagen and other new competitors have strengthened their positions in this market.

Comment:
Until recently a Cinderella compared with the heavier and lighter truck sectors, the heavy truck category has enjoyed two successive quarters as the fastestgrowing sector of the commercial vehicle market.

Comment:
No fewer than 10 of the 16 entries in this table are "red", indicating higher than average (in this case, 21.3%) growth between 2005 and 2006. Some are new players and some are small players, but they do include five manufacturers who have been long-established in the market – Freightliner, International, MAN, Iveco and Daf. However, all six of the "non-red", or below-average-growth, players are similarly long-established – Volvo, Mercedes-Benz, Scania, Hino, Nissan Diesel and Isuzu. Between them, these illustrious manufacturers delivered 2552 units into the extra-heavy market in the first six months of 2005 but only 2365, or 7.3% fewer, units into this market in the first half of 2006. The conclusion to be drawn is that if it had not for Tata and other new players, 2006/2005 growth would have been modest, if not minimal.

Comment:
In June, Daf sold its first buses into the Southern African market, while Iveco has also rejoined this market in a small way.

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.