FEBRUARY
THE BUDGET AND THE MOTOR INDUSTRY
Tony Twine’s annual review of the National Budget, and its potential impact on
the Motor Industry in the year ahead, started off by tracing the economic and political
backgrounds to the Budget, and a summary of the main points contained in the Budget.
Future prospects for the Motor Industry were discussed in terms of potential impacts from
Fuel Levy changes, which mainly favoured primary sector diesel users, but imposed some
additional RAF-contribution burdens on hauliers, Personal Disposable Income, where the
benefit was mainly to be felt by the lower income groups, some increased spending on
specific projects, sectors and geographic areas, which could generate some additional
light and heavy vehicle demand, and relaxed government financial regulations which would
allow infrastructure programmes to continue across fiscal year breakpoints. In general
terms, the Budget was seen as beneficial to the Motor Industry.
MARCH
THE SOUTH AFRICAN TRUCK & BUS MARKET – HOW BIG IS BIG?
After dealing with historic segmentation trends in January, Frank Beeton turned
the discussion to Market size. A rational examination of recent negative and positive
influences failed to explain somewhat radical fluctuations in volume trends. In general,
the market was assessed as underperforming in comparison to GDP and national fuel
consumption tendencies. In conclusion, it was suggested that some of the sluggishness in
truck sales may be due to a reactive supply industry, which has lost its ability to
stimulate demand for new trucks. Econometrix and NAAMSA forecasts for volumes around 14
000 units in 2003, should, therefore, be achievable given adequate marketing support.
30% SUBSIDY AVAILABLE FOR TRUCKS
A brief summary of the Department of Trade’s Critical Infrastructure Programme, and
Small Medium Enterprise Development Programme, containing subsidies ranging from 10% to
30% on capital and equipment costs, were provided for client information.
MOTOR RETAIL REVENUE TOPS R90Bn.
Tony Twine commented on the Year 2000 Retail Trading Statistics for the motor sector as
then recently published by Statistics SA. They included record revenue levels for sales of
both new and used vehicles, and new methods of recording spares, workshops and
"other" revenues which obviated any meaningful comparisons being made with
earlier equivalent reports.
APRIL
RECENT INTERNATIONAL ALIGNMENTS IN THE MOTOR INDUSTRYFrank Beeton’s review of
partnerships, alignments and outright takeovers broadly covering the industry’s first
century of existence. It revealed a consistent trend towards rationalisation, which is
expected to continue in the face of ever-tightening environmental legislation, and
competitive cost pressures. An analysis of the present DaimlerChrysler,
Renault/Nissan/Volvo and Ford alliances was made, and some candidates for future
alignments were identified.
REVENUE OUTLOOK, 2001
Statistics South Africa’s latest revision of Motor Industry Retail Trading Revenue
data, dating back to 1991, prompted Tony Twine to revisit his forecasts for 2001. These
included growth of 22% for New Vehicle Revenues, 20% for Used Vehicle Revenues, -2% for
Spares, -0,8% for Workshops, and 5,8% for "Others". Total revenue was forecast
at R104 bn for 2001, reflecting 13,7% growth over 2000, y-o-y.
MAY
TRUCK MARKET COMMENTARY
Frank Beeton compiled the first of his now regular, quarterly, Truck Market reviews. The
established format opened with actual market volumes for the quarter, followed by a
comparison with the most recent Econometrix historical forecast, sector growth rates,
segmentation dynamics, and a ranking of manufacturer performance. During the first quarter
of 2001, DaimlerChrysler, Toyota, Nissan and MAN led the market, with strong supporting
performances from Iveco, Volvo, and Tata.
OIL PRICE PRESSURE
Tony Twine revived the question of crude oil pricing and its effect on the South African
economy, following on from a previous REVS article published early in 2000. Comparisons
between local currency prices of crude in South Africa and other countries, including
Italy, India, Thailand, South Korea and Australia showed that SA had suffered a
considerable disadvantage in this respect because of long-term exchange rate weakening.
This situation called into question South African motorists’ traditional preference
for cars with large-displacement engines.
JUNE
THE PETROL-DIESEL GAP REVISITED
Tony Twine’s article clearly defines the present fuel demand and production/supply
picture in South Africa, together with the inherent imbalances caused by the higher level
of current demand for petrol. Discussion follows on the influence of the taxi industry on
the excess demand for petrol, the desirability of changing taxi operators’ fuel of
choice from petrol to diesel, and the positive role that can be played by Sasol in
reducing the average sulphur content in South African diesel fuel. Current perceptions
were that the authorities are intent on achieving a more equitable petrol/diesel mix, and
are expected to intervene in the market some time in the future.
SEGMENTATION TRENDS IN THE TRUCK MARKET SINCE 1990
The discussion on Truck Market segmentation, initiated in January, was carried forward by
Frank Beeton. In this article, segments were tracked by volume, recognizing that some
truck manufacturers are niche players, and do not participate across all mass segments or
groups. Stimulation of the MCV segment from integral van sales was recognised, mirroring a
steady decline in the "Distribution" grouping which includes most 4x2 rigid
trucks over 7500 kg. GVM. Recently, the most impressive growth has been experienced in the
15-20 ton GVM segment, predominantly made up of 4x2 truck-tractors and buses, while the
remaining over 20 000 kg. XHCV segment has moved mainly sideways. No new radical changes
were foreseen.
JULY
SOUTH AFRICAN VEHICLE POPULATIONS
The publication of updated-to-Year 2000 Vehicle Population statistics from NaTIS
enabled Tony Twine & Frank Beeton to incorporate these into Econometrix’
database, and project a segmented forecast for the year 2004. A crude comparison was also
made between NaTIS population statistics for the past 4 completed years, and equivalent
NAAMSA sales totals, to give some indication of vehicle "parc" replacement
rates, generally considered to be extremely low in the case of heavy load units.
Accompanying commentary noted that NaTIS’ population of "heavy passenger"
vehicles had nearly doubled between 1999 and 2000, and that this was clearly a case of
statistical housekeeping.
AUGUST
TWO HUNDRED EDITIONS DOWN THE LINE
Reminiscences from Tony Twine included a "Who’s who" of REVS
personalities and contributors over the past two hundred editions, together with some
explanation of how data content and presentation has evolved since January 1985.
Structural and environmental changes to the client Motor Industry were also broadly
covered, together with the significant decline in the number of franchised dealers in the
1997-2000 timeframe. Looking forward to the 300th edition, and 25th
anniversary of REVS in December 2009, its founder acknowledged paternal responsibility for
!! AUTO ALERT !! , a bonny, bouncing baby born in April 2001, and finding its fortnightly
e-mail way onto the desks of decision-makers around the industry.
TRUCK MARKET COMMENTARY
The second quarter of the 2001 calendar year came under Frank Beeton’s microscope,
and, using the now well-established format, he found a Truck Market growth of 6,7% over
the first quarter. Shifts in segmentation dynamics mainly involved a sharp upward movement
by the over 20 000 kg. XHCV grouping, marking the start of large indirect contract
deliveries of 6x4 units into the public sector. In the manufacturer rankings, Delta and
MAN exchanged places for fourth position, Iveco slipped down the order after a strong
first quarter, and Ford’s imminent exit from the SA truck market was clearly evident.
A new section, commenting on significant market happenings was introduced, in order to
explain recent trends and to provide some insight into expected future developments.
SEPTEMBER
INTERNATIONAL NEWS
A compendium of international news items, listed by manufactuer, from REVS’
healthy offspring !! AUTO ALERT !!, was inserted in to the September edition. Topics
covered included BMW’s plans for Rolls-Royce, DaimlerChrysler’s used truck
problem in the US, the Ford/Firestone dispute and its cost implications, Fiat’s new
product plans, GM’s unpopular decision to axe the Oldsmobile brand, MAN’s
structural dilemma, a progress report on MG Rover, Nissan/Renault diesel car plans for
Europe, Toyota’s "go-it-alone" tendencies, Volkswagen activities in the
former East Germany, and Volvo’s Indian truck initiative.
BE YOUR OWN PETROL PRICE FORECASTER
Tony Twine took issue with the Department of Mineral and Energy’s public comments
warning the public against "analysts and economists" and their petrol price
forecasting capabilities. In order to strip this "black art" of its demonic
mantle, Tony explained to everyone how they, too, could forecast the petrol price, using
public domain information. Happily, good relations between DME and the economist
fraternity have subsequently been restored.
OCTOBER
PETROL VS. DIESEL SALES IN THE LIGHT VEHICLE MARKET
Frank Beeton made a rare foray into the world below 3500 kg. GVM in order to examine
fuel choices in the passenger and light commercial vehicle markets. He found considerable
evidence of a growing trend to diesel power in the LCV market, and a relatively small, but
steady parallel trend in the passenger car business. Supporting rationale largely
discounted fuel and vehicle pricing as motivating factors to this trend, and suggested
that the reasons were more likely to be longer vehicle lives, increased petrol engine
sophistication, improved diesel technology, reduced diesel vehicle theft incidence, diesel
range expansion, environmental concerns and the end of government discouragement of diesel
light vehicle usage.
A FURTHER NOTE ON FUEL PRICES
A brief note was included clarifying some of the input data for the previous month’s
"do-it-yourself" fuel price calculator.
NOVEMBER
TRUCK MARKET COMMENTARY
This review of the third quarter by Frank Beeton revealed further growth of 7,4% over the
second quarter of 2001. Segmentation dynamics focussed mainly on strong bus sales driving
the 15 000 – 20 000 kg. GVM sector sharply upwards. In the manufacturer rankings,
DaimleChrysler retained first position, but the remainder of the top four played musical
chairs. Nissan, after a strong showing, took second position from Toyota, and MAN overtook
Delta to re-enter the supreme quartet. Lower down the order, Scania surged into sixth
place on the back of strong bus sales, while Volvo, Iveco and Peterbilt drifted somewhat
in the third quarter. The outlook for good sales volumes over the year-end period was
positive due to committed bus deliveries, but concern was voiced over the cost-push effect
of continuing weak Rand exchange rates.
REVENUE GROWTH PROSPECTS
Tony Twine presented comments on the latest Stats SA data for automotive retail up to and
including, August 2001. New vehicle trading revenue growth was reported to be slowing, but
the 22% Econometrix forecast for the whole of 2001 appeared still to be possible, although
a final result around 20% seemed more likely. The outlook for 2002 is growth of 7% from
new vehicle revenues. Used vehicle revenue growth is now forecast at 21% for the year
2000, falling to 10% in 2002. The outlook for spares revenue growth is 10% in 2001, and 6%
in 2002, while workshops are expected to grow revenue from 7,5% in 2001, to 14% in 2002.
"Other" revenue is estimated to grow at rates of 13% and 6% in 2001 and 2002,
respectively. The overall revenue growth forecast for all motor retail sectors combined is
16,5% in 2001, followed by 8,3% in 2002.
THE YEAR THAT WAS.
Standing this close to the fire, there is an enormous temptation to
divide 2001 into pre and post 11th September periods. The truth is, however,
that global and domestic economic performances were busy slowing down well in advance of
the third quarter. The tragic events linked to the attacks on New York and Washington, and
the resulting military action by the USA and its allies, acted to accelerate the
realisation that all is not well with the world economy, and its leading locomotive, the
United states economy. Once the already brittle confidence factor was well and truly
bridged by an additional load in the form of reduced physical security, there was no
longer much doubt or argument about the direction in which economic performances were
heading. The slide, already underway, was recognised – the debate then started over
how long it might last. After a flying start to the year, the South African economy began
showing signs of listlessness toward the end of the first quarter. In concert with this,
new motor vehicle sales kicked off with two very strong months in January and February,
after which a return to the more cautious levels of the fourth quarter of 2000 was
detectable. We may have witnessed a new force emerging in terms of new vehicle sales
seasonality, with the bulk of the retail procedure having already taken place during
November and December, but the registration of the vehicles being held over to the early
months of the new year. The first licensing date has an important impact on residual
values, and the month soon gets lost. A year 2001 vehicle is simply worth a lot more than
a year 2000 vehicle at anytime in the future, even if the two are registered for the first
time only a week apart. Higher levels of institutional, as oppose to private buying, could
have triggered the weakening of November and December, and the strengthening of January
and February, well into the future. Economic growth and new vehicle sales (with the
exception of HCV sales) both sagged during the second quarter, with April entrenching its
position as the weakest seasonal month for vehicle retail sales. Data published late in
November by Statistics SA showed consecutive weakening of the GDP growth rates for the
second and third quarters, with no great deal of hope being held out for the final
quarter. Real export growth, which had sustained GDP growth to a far greater extent than
domestic demand had done, was beginning to feel the chill of the global climate. The Rand,
under pressure during the first half of the year, buckled from weak levels of just over
R8/US$, to reach R9 by the end of September, and R10 half way through November. The import
exposure of new vehicle prices began to suggest more rapid increases in the near future.
Domestic vehicle sales volumes, as well as export volumes, were hit by
the three-week NUMSA strike at the vehicle assembly plants during August. Despite a
deliberate pre-emptive accumulation of built-up inventory ahead of the strike, reasonably
free supply returned only in October particularly on the local assembly rich LCV front.
The last six weeks of the year suggested that the seasonal experience of November 2000 to
February 2001 might well be repeated.
Both public and private sector economic growth forecasts declined
during the year, especially after the 2000 base period was revised upwards from 3.1%
growth to 3.4% growth in November. The outlook for 2002, although battered on the margin
after 11th September, still offers real GDP growth in excess of 2%. Light
vehicle sales should be moderately down, roughly to year 2000 levels, with MCV’s
steady, and HCV’s marginally up during 2002. Revenue growth, even when reduced to
real levels by the subtraction of CPI inflation, should still be positive, even if reduced
from 2001 levels.
The creators of REV’s and all at Econometrix wish readers a Merry
Christmas, and all the best for the New Year and beyond.
