July 2005

Year-on-year MCV growth of 54% leads strong industry charge

Although people may soon start to speculate about "the bubble bursting", the current strength of the Southern African new vehicle industry continues to be based on such sound economic fundamentals that even the inevitable correction may not take place until next year. 
Tables A and B illustrate and size and pattern of the growth of the different sectors. 

MCVs, especially, but HCVs as well, shine in these comparisons, even though the combined HCV year-on-year increase (see Tables A, 3, 4, 5) is the lowest of the sectors.
In the MCV sector (Table 2), Tata's very strong performance must be noted. In only a year, this new player not only jumped from sixth to a very strong second position, but, thanks to its recent entry in other sectors, now lies fourth in the totals table (Table 1). In the second quarter, Ford and Fiat debuted in the MCV sector, the first with a notable performance from its heavy F250 pick-up - recalling a famous model from an earlier generation - and the second with a more tentative entry from its Ducato model.
Sales of new M/HCVs are now well on the way to more than doubling in five years, thus exceeding our own recent forecast (see April Fleetwatch). In the same issue, we noted that "this market has at last matured to its potential as measured by the region's fundamentals", and continued "[these fundamentals are] at present on the side of an expanding economy that requires both more transport and more efficient transport logistics to remove export and other bottlenecks as they arise ? as they surely will". 
The contribution of the new M/HCV market to the region's expanding GDP is indicated by the average suggested retail prices of the vehicles in these sectors multiplied by the number of units sold:

• Medium commercials: R250 000 (or a total of R1.4 billion for the six months)

• Heavy commercials: R380 000 (or a total of R880 million for the six months)

• Extra-heavy commercials: R880 000 (or a total of R3.6 billion for the six months)

• Buses: R600 000 (or a total of R270 million for the six months)

• Making a total GDP contribution from new M/HCVs of R6.2 billion for the first half of 2005.

• The colour entries in this and the other tables indicate players whose year-on-year increases are higher than average.
• Unusually, there are only four of these colour entries in the total table, indicating that the strength of the market continues to be more concentrated than in the recent past. Iveco, Volvo, Volkswagen and Peugeot are not benefiting from the strong market, while Tyco's growth is also minimal. It must be assumed that the new competition is hurting these five manufacturers.
• The already very strong year-on-year first-quarter growth of 27.7% has now increased by more than eight percentage points to register record year-on-year first-half growth of well over one-third (34.9%).
• If it had not been for the astonishing performance by Tata referred to in the introduction - which contributed almost a third of the total M/HCV growth - the increases registered by General Motors, DaimlerChrysler and Toyota/Hino would have been regarded as even more remarkable.
• As indicated in the introduction, Ford and Fiat joined the heavier vehicle markets during the second quarter. 

• This weight category has seen the most rapid increase of all the categories - from cars upwards - in the Southern African new vehicle market.
• Tata on its own contributed 20 percentage points of this table's year-on-year growth - or almost two-fifths of the total growth. In the first half of 2005, this company's sales of 1082 units were 70 units higher than those of the two DaimlerChrysler marques combined, namely Mercedes-Benz and Mitsubishi Fuso.
• Except for Iveco, the other established manufacturers all remained in contention.

• Compared to the position at the end of 2004, this weight category has four additional players ? Tata, Mitsubishi (Fuso), Renault and Western Star ? with Daf also returning only in the second quarter, but Volvo appearing to be withdrawing from this sector. 
• In returning to its first place in the table, Toyota/Hino's very strong second-quarter showing helped the sector to increase its first-half growth by more than five percentage points compared with the year-on-year growth of 22.2% for the first quarter.
• General Motors' F-series Isuzu trucks also sold exceptionally well in the second quarter.
• With the heavier models in its LPT truck range, Tata debuted strongly in this sector in the second quarter.

• Growth in this sector remained the weakest of all four of the M/HCV sectors, and was far lower than the growth of 24.9% recorded for extra-heavies for the whole of 2004. 
• As a group, the main Tyco divisions - International and Daf - continued their recent disappointing performance, as did Volvo.
• The domination of the two DaimlerChrysler divisions - Mercedes-Benz and Freightliner, which captured 33.8% of the total market in the first half of 2005 - was somewhat less than for the first-quarter, when their share was 37.6%, but well up on their 31.0% share for the whole of 2004. 
• As the colour entries indicate, the market growth was shared more evenly than in other sectors, with Isuzu and Freightliner both doing well in percentage terms and Mercedes-Benz in terms of the increase in the number of units it sold.
• In the second quarter, Tata also began competing in this sector.

• Although the trend has now turned in the right direction, the bus and coach market continues to underachieve its potential. The total investment in new buses for the year to date represents only R270 million in retail terms - or about one-third of the value for the period represented by sales of new Toyota Hiace minibus taxis and the growing number of other minibuses and midibuses from manufacturers such as Tata.