February 2006

Sales comparison between 2005 and 2004 shows a record growth of 31.7% 

A YEAR ago, we witnessed an increase in sales of new medium and heavy commercial vehicles in of no less than 28% between 2003 and 2004. Few could then have predicted that the next year-on-year increase would be closer to 32%. 

For the industry as a whole, Naamsa, the representative body commented (on 10 January 2006) that during 2005, South Africa had probably the bestperforming new vehicle market in the world. 

Table A highlights the 2005 performance quarter by quarter for all new vehicle sales, including cars and light commercials. The highest index figure for each category is highlighted, showing that the third quarter was the strongest for all sectors except medium commercials, which continued to show growth in Q4. 

Again with the aid of indices, Table B shows the strength of 2005 compared with both 2004 and 2003. 

Over the two-year period, the combined figure for medium and heavy commercials, or M/HCVs (the "mediums", "heavies", "extra heavies" and "buses" of Tables 2, 3, 4 and 5) grew faster than those of the lighter vehicle categories and approached the all-time record set up no less than a quarter of a century ago, when 30 742 M/HCVs were sold in 1981. 

Notes: 
(1) Naamsa comments that sales of new vehicles not at present reported in detail through the industry body "are estimated to have added 52 432 units to the 2005 figures . . . This effectively translates into an annual all-time record aggregate South[ern] African . . . market in excess of 617 000 vehicles." 
(2) The export numbers include only some 400 M/HCVs. 
(3) Estimate. 

In the numbered tables which follow, it will be seen that the Indian company Tata, which has been operating in this country for barely two years, is making large inroads into the commercial sectors of the total industry. Tata is now third in overall sales (Table 1), second for MCVs (Table 2), fifth for heavy trucks (Table 3) and ninth for extra-heavy trucks (Table 4). 

M/HCVs make a significant contribution to South Africa’s GDP, with the figure for 2005 totalling some R13.5 billion. The sector breakdown was some R2.7 billion for MCVs, R2.0 billion for heavies, R8.0 billion for extraheavies and R0.7 billion for buses. 

The outlook for the year ahead is less easy to predict than was the industry’s good performance in 2005. There is no doubt that the industry is now achieving its potential both in Southern Africa and in the wider world. (Indeed, although they affect the heavier sectors only peripherally, vehicle exports in 2006 are expected by Naamsa to total some 200 000 units, or close to 40% higher than the 2005 figure.)

The positive influences are likely to come from the strength of the South African economy and the parallel business confidence levels. With GDP growth expected to be about 5%, a continuing strong rand and stable interest rates that are low in recent historical terms, the prospects for sales of medium and heavy commercials must be good. 

It might, however, be overly optimistic to expect another year-on-year increase of the order of 20% or more. This is mainly because the 2005 performance was itself so strong. Indeed, M/HCVs might do well to consolidate at levels perhaps 10% higher than those of 2005. 

Another 2005 indication was the relative frailty of some of the smaller established players in the face of exceptionally strong challenges by the newer contenders, led by Tata. The managements of some of the smaller established players will need to be innovative and flexible if they are to regain their attractiveness and competitiveness in a market characterised by higher levels than before of both quality consciousness and price awareness. 

• Against the background of slow progress with the government’s proposals to make road passenger transport safer, this sector does no more than tick over, with the positions of the four established players changing from year to year and sometimes from quarter to quarter. 
• Three or four minor players maintained almost a token presence, although Nissan Diesel has given notice that it might like to compete seriously in the future.