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Past Issues

February 2005

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McCarthy Motor Holdings

BRAND PRETORIUS "the tide has turned in South Africa"

An annual tradition in the motor and truck industry has been the start-of-year press conference held by Brand Pretorius, CEO of McCarthy Motor Holdings, where he reflects on the previous year's figures and predicts performances for the year ahead. Although the focus is more on the car than the truck side of the industry, his experience from being intimately involved in the manufacturer side of things (he was MD of Toyota Marketing for many years) and his insight into dealer operations in his current position, gives us a bird's eye view of the industry as a whole. FleetWatch's Paul Collings, who was there, reckons that if Naamsa statistics and the crystal ball of Pretorius are anything to go by, 2005 is going to be a cracker of a year for the retail truck industry.

Commercial vehicles are in demand! According to Naamsa, more so than passenger vehicles. While car sales recorded a 21.8% growth from 2003 to 2004, MCVs notched up a whopping 35.5% growth over the same period. HCVs also did exceptionally well with a 22.4% growth and LCVs scoring nicely with 21.7%.

According to Pretorius, this reflects good news for the country as a whole. "Vehicle sales are an accurate economic barometer and the unprecedented 26% increase in overall vehicle sales suggests the tide has turned in South Africa. Political stability has resulted in growing business confidence and macro economic growth is up by approximately 3.5%. The prime-lending rate has dropped, prices have deflated, salaries have increased and tax cuts have resulted in more disposable income. All these factors have made vehicles more affordable."

With the stabilising of the South African economy has come increased foreign investment, not least from motor manufacturers. The local vehicle market has more models on offer than ever before, driving competition within the retail motor industry. "This," says Pretorius, "has resulted in aggressive marketing, where retailers are adding value with more features, service agreements and warranties etc on all vehicle groups."

2005 better still?
Gazing into his crystal ball, Pretorius reckons 2005 will continue the growth trends experienced in 2004. "Macro economic growth should register around 4%, with government and parastatals spending much more on infrastructural upgrades. The Rand will remain stable with inflation maintaining its low profile. Job numbers will increase and income levels will rise. Black economic empowerment will accelerate."

He predicts an oversupply of both new and used vehicles on the market in 2005. Fleet and private owners will replace their vehicles and the possible introduction of private leasing agreements will lower barriers of ownership even further, pushing more used vehicles onto the market, forcing dealers to sell them at lower prices.

On the downside, Pretorius sees possible price inflation through pressure from trade unions demanding higher wages for local automotive workers and the global steel price looks set to rise with China creating strong demand. He warns that new vehicle sales may be affected negatively by the drop in trade-in prices (a result of overstocked used vehicle yards). However, these factors pale in comparison to the bullish trends set up over the last twelve months or so. 

The good news for transporters is the expected increased investment by government in new infrastructure development. There will no doubt be several tenders going out in months to come calling for tipper and mixer operators. "New housing projects will create a need for waste management contractors and once the new Coega harbour is opened, long distance haulers will get their shot at the big bucks, BEE requirements withstanding, of course."

What dealers can expect.
Outside of the conference, FleetWatch asked Pretorius for his take on what dealers could expect in the year ahead and where their challenges would lie. Here's what he reckons.

Motor dealers, including heavy truck dealers, are deriving considerable benefit from the substantial growth in sales volumes. Not only is the growth in unit sales beneficial but the service departments of dealerships are also experiencing strong growth due to the larger vehicle parc and the positive impact of extended warranties and service plans.

The only area where caution is required is in used vehicle trading. Due to price stability on new vehicles, the values of used vehicles have declined sharply. Dealers therefore need to be extremely cautious when it comes to trade-in values.

More emphasis on parts supply and service
The quality of after sales service has never been more important. With such an intensely competitive market, more emphasis than ever before should be put on parts supply and the provision of world class service. In this regard, dealers need to make a disproportionate investment in the training and development of their people.

It is clear that vehicle manufacturers will continue to demand the very best in terms of facilities, equipment and service delivery. Exclusive facilities projecting the right image will necessitate a substantial additional investment in bricks and mortar, with the consequent increase in fixed costs. Dealers will therefore need to concentrate on increasing volume throughput and optimising internal efficiencies.

Black Economic Empowerment and Employment Equity should remain at the top of the agendas of progressive dealers. It is imperative that motor retailers should also play their rightful role in terms of the transformation of our economy and the creation of a more inclusive society. 

Lastly, motor dealers need to become more active in 2005 in the area of corporate social investment. Through their corporate caring, they should also touch the lives of their communities in a positive manner.

In overall terms, motor dealers can look forward to another exciting year, which will be characterised by more volume growth within a very competitive environment.