May 2005

The outstanding performance of last
year continues

The whole of the Southern African new vehicle industry - and not least the medium and heavy commercial vehicle (M/HCV) sectors - has made an amazing start to the new year. The 2005/2004 first quarter increase for the whole industry was 21.2% compared to the 2004/2003 increase of 16.7% for the same first quarter. 

The detail can be picked up in the following tables. 
Coming as it does on top of the 27.3% increase for the full 2004 year compared to 2003, the 27.7% M/HCV first quarter increase has been both remarkable and predictable - remarkable because of the sheer size of the increase, which indicates a market that will have doubled in size in only five years; and predictable because the market has at last matured to its potential as measured by the region's fundamentals. 
While virtually all economies - the Chinese economy may have been a recent exception - are necessarily cyclic, we expect never again to see the M/HCV market at its mid-1990s level of about 10 000 units a year.
In its market summary and forecast dated 16 March 2005, the vehicle industry membership and reporting body Naamsa expects growth rates for sales of new M/HCVs in the Southern African Customs Union to be around 8%, 4% and 5% in 2005, 2006 and 2007. While Naamsa's duty to its membership may be to be conservative and while the 18% and 27% growth figures of 2003 and 2004 may well not be sustainable at those levels, our own view is that only an unlikely combination of

• a sudden decline in GDP
• a sudden increase in interest rates
• reckless price increases by the main industry players
• a further strengthening of the rand against the euro and other major currencies and
• a substantial decline in trade and in business confidence
  will restrict new M/HCV growth in our region to less than an average of 10% for at least the next two years.

While there is never room for complacency, the fundamentals are, as we have indicated, 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 colour entries in this and the other tables indicate players whose year-on-year increases were higher than average.
• Unusually, there are only three of these colour entries in the total table, indicating that the considerable strength of the market at the start of the year was much more concentrated than in the previous year. Except for Iveco, Volvo, Volkswagen, Scania and ERF, the whole market, however, remains very strong.
• The first quarter market growth is very nearly the same as it was for the whole of 2004.
• The table has two fewer entries than at the end of 2004, with Renault now part of Tyco and Mack now part of Volvo.
• Tata's rapid climb of the table, from 8th position at the end of 2004 to 4th ahead of the very strong General Motors, has been remarkable, especially as it is represented only in the medium truck weight category.

• This weight category has seen the most rapid increase of all the categories - from cars upwards - in the Southern African new vehicle market.
• Of the three newer players, the growth of Tata continues to be spectacular, while Peugeot and Volkswagen appear, for the moment, to have found their levels.
• Except for Iveco, the leading companies are all doing well.
• We have separated the two DaimlerChrysler divisions represented in this market - Mercedes-Benz and Mitsubishi - so that their relative progress and competitiveness can be studied more easily.

• Compared to the position at the end of 2004, this weight category has three additional players - Mitsubishi, Renault and Western Star - while Daf is not at present represented.
• Also compared to the end of 2004, there has been no change at the top of the table.
• More than half the companies listed have contributed to the above-average growth rate - which is higher so far than it was for the whole of 2004 (20.2%).

• Though still encouraging, the growth of this weight category has been considerably lower at the start of 2005 than it was for the whole of 2004 (24.9%).
• As a group, the main Tyco divisions - International and Daf - continue to lack the momentum they showed in 2003.
• The two DaimlerChrysler divisions - Mercedes-Benz and Freightliner - dominate with 37.6% of total sales (up from 31% for the whole of 2004). This is almost the same as the combined percentage share (38.2%) of the next three players or groups - Tyco (13.4%), MAN (13.3%) and Volvo-Mack (11.5%).

• The year has followed the typical pattern of recent years in which below-average orders are placed in the first quarter for bus and coach chassis
• In this thin market, Nissan Diesel continues import a few of its buses, while Western Star, a North American company in the DaimlerChrysler group, is now doing the same