February Truck Market Shows Encouraging Growth

The preliminary published February 2012 result for the South African market for commercial vehicles with Gross Vehicle Mass ratings of more than 3 500 kg, was still devoid of sales volumes from a substantial market participant, so it is not possible to draw direct comparisons with historical data that previously contained full reporting details from Mercedes-Benz South Africa.
This non-reporting manufacturer has provided only a globular February commercial vehicle sales total of 630 units, but this must be assumed to also include models from the Light Commercial Vehicle market (Gross Vehicle Mass Ratings below 3 500 kg), so this volume cannot be used to complete the record of the segments covered by this report.
A total sales volume of 1 851 units was units reported during February, 2012 by those members of the National Association of Automobile Manufacturers of South Africa (NAAMSA) who have elected to remain within the full reporting system.
The market composition was made up of 731 Medium Commercial Vehicles (GVM ratings between 3 501 kg and 8 500 kg), 395 Heavy Commercials (goods vehicles with GVM ratings between 8 501 kg and 16 500 kg), 652 Extra Heavy Commercials (goods vehicles with GVM ratings above 16 500 kg) and 73 passenger Buses with GVM ratings above 8 500 kg. (Please note that these volumes also include aggregated MCV sales recorded by Associated Motor Holdings and Amalgamated Automobile Distributors, which were made up exclusively of Hyundai-branded light truck models).
“Once again, it has been necessary to evaluate the performance of the truck market in February by comparing the latest result published by NAAMSA with data from earlier timeframes from which sales by Mercedes-Benz, its associated brands and other non-reporting manufacturers have been removed. Recognizing the potential distortions that such an analysis might produce, it is prudent to extend the latest review period to also include the January result, thus arriving at a year-to-date comparison for the purposes of this market comment,” says Dr. Casper Kruger, Vice President of Hino in South Africa.
“The resulting calculations reveal total year-on-year market growth of 8,1 per cent when compared to the equivalent first two month period of 2011. In the case of the individual segments, entry-level MCV sales improved by 2,3 per cent, cruiserweight HCV volumes by 17,2 per cent, the premium payload XHCV category by 6,1 per cent and passenger Busses by 52,2 per cent,” he adds.
The substantial improvement in HCV sales is particularly noteworthy, reflecting recent momentum recovery for the Japanese brands that dominate this category, following the reduction in product availability caused by the March 2011 tsunami/earthquake. The uptick in Bus sales is also welcome, as this category has retreated somewhat in the period following Soccer World Cup 2010, and is currently re-establishing a base for future growth.
Kruger adds,“The market growth evident in the above analysis confirms earlier predictions that the momentum gathered by the market during the latter months of 2011 would be sustained into the early months of 2012, while vehicle manufacturers and importers catch up with the unfilled orders that were placed during the latter months of 2011. However, the earlier uncertainty concerning prospects for the market beyond the first quarter of 2012 has been mitigated by the Minister of Finance’s announcement, during his annual Budget Speech, that infrastructure spending to the value of R83 billion has been provided for during the 2012/13 fiscal year.”
The nature of the resulting infrastructure projects, including road and dam construction, improvements to public transport, and housing development, should extend the term of the currently positive environment for commercial vehicle sales.
Kruger concludes: “The planned extension of this infrastructure programme by a further provision of R188 billion over the 2013-2015 period should also sustain the steadily growing trend in truck and bus sales for the medium term. The recent announcement of measures to promote local manufacture of buses through selective public sector tendering is also good news for the local bodybuilding industry, which has found itself seriously disadvantaged since the relaxation of importation restrictions in the mid-1990’s, and contracted substantially as a result. Despite continuing concern over high fuel prices, the local vehicle supply industry is currently operating in a favourable marketing environment, with improving business sentiment, a strong Rand, and the lowest interest rate scenario since the mid-1970’s. These factors combine to present a more positive outcome for trucks and buses during 2012 than may be the case for light vehicles, because of pressure on the disposable income of consumers”.

NAAMSA Comments On February 2012 New Vehicle Sales

The National Association of Automobile Manufacturers of South Africa (NAAMSA) says new car and commercial vehicle sales for the month had registered modest gains compared to the corresponding month last year. It said aggregate industry sales had improved by 3 159 units or 6.4 per cent to 52 356 vehicles from 49 197 units in February last year.
It said, for the time being, that Mercedes-Benz South Africa (MBSA) would provide a single total sales number for passenger cars, commercial vehicles and export sales. Overall, out of the total detailed (disaggregated) reported industry sales of 49 556 vehicles (excluding MBSA), 82.2 per cent or 40 761 units represented dealer sales, 7.6 per cent represented sales to the vehicle rental Industry, 5.8 per cent sales were to Government and 4.4 per cent were to industry corporate fleet sales.
Aggregate Industry new car sales during February 2012 at 36 357 units (including MBSA) reflected an improvement of 2 303 units or 6.8 per cent compared to the 34 054 new cars sold during February 2011. The new car market had received support from car rental Industry demand which accounted for about 10.5 per cent of total new car sales.
The absence of MBSA commercial vehicle sales data by segment rendered year on year comparisons difficult. The focus therefore, for the time being, would be on total commercial vehicle sales. In the event, industry total commercial vehicle sales during February, 2012 at 15 999 units showed an improvement of 856 units or 5.7 per cent compared to the 15 143 units of the corresponding month last year.
Exports of South African produced motor vehicles, including MBSA export sales data, during February, 2012 at 22 630 vehicles had registered a decline of 2 525 units or 10.0 per cent compared to the 25 155 vehicles during February last year. Industry export sales were expected to improve from April, 2012 onwards as the Ford global compact vehicle export programme and the BMW new 3 series export volumes were ramped up. However, the Industry’s export performance during 2012 would remain a function of the direction of the global economy.
Vehicle exports into Europe were likely to soften as a result of the recession and debt crisis in the Eurozone. This could be offset by higher export volumes to African countries. At this stage, it was anticipated that for the year as a whole vehicle exports could grow by about 10 per cent to just over 300 000 units.
The outlook for 2012 in terms of total industry sales remained one of modest growth. Factors that would continue to lend support to the domestic market included the ongoing improvement in the financial position of consumers, relatively low interest rates, continuing improvement in vehicle affordability in real terms, the highly competitive trading environment and new model introductions. As a result, domestic sales were expected to continue to reflect growth, but at a relatively subdued rate. The sharp rise in the purchasing manager’s index over the past two months also augured well for future economic activity levels.
NAAMSA welcomes the decision by Associated Motor Holdings and Amalgamated Automobile Distributors to disclose historical detailed new vehicle sales volumes. Disaggregated sales data for the years 2006 through 2009 have been uploaded in the database administered by Messrs RGT Smart. The 2010 AMH sales volumes will be made available in the near future. The data covers the following brands – Daihatsu, Hyundai, Kia, Lamborghini, Proton and Ssangyong.

GMSA's Renews Sales And Marketing Team

General Motors South Africa (GMSA) has made a number of key leadership appointments in its Sales and Marketing Department to position itself for further future growth.
Malcolm Gauld, GMSA Vice President of Sales and Marketing explains, “These new appointments, effective from January 1st 2012, form the basis of a strong Sales and Marketing team. Each new appointee has proven to be dedicated, talented in their fields, and extremely knowledgeable about the company and our products. Together they create a formidable force ready to tackle a rather competitive automotive market.”
The new structure begins with Alastair Ironside, a 31 year veteran with the company, who takes a leadership role as the new General Manager, Marketing. Ironside returned to South Africa after a five year stint in Thailand where he was Director of Planning and Programme Management for South East Asia. In his role abroad he was instrumental in the development of the Chevrolet Trailblazer, the new seven-seater that will be introduced to the local market next year.
Asked what he thought of the South African market, Ironside said, “This market is one of the most brand-over-traded markets in the world; however, GMSA through its well entrenched brands Chevrolet, Opel and Isuzu, has earned credibility and respect over the years.”
Supporting his efforts are two Brand Managers. Mlungisi Nonkonyana, previously the Market Area Manager for Johannesburg, is promoted to the position of Isuzu Brand Manager after nearly nine years with the company while Chris Cradock picks up the position of Opel Brand Manager, both reporting to Ironside. Both new appointees bring a wealth of product knowledge to their new positions and are wholly dedicated to driving their respective brand identities in the SA market.
Replacing Nonkonyana in the Market Area Manager position is Juanita Smith, who has spent almost 17 years with the company. During this period, Smith held various positions within the Finance and Marketing departments, with her last position being Chevrolet Product Manager.
Meanwhile, Cyril Gumede, who has been with GMSA for nearly seven years, has accepted the challenging position as Market Planning Manager by displaying a strong aptitude towards this particular discipline. Gumede replaces Chris Cradock.
On the sales side, Isaiah Ntuli has been promoted from Regional Manager to Vehicle Sales Manager, taking over from American born, Brian Olson, who came to South Africa in 2005. Ntuli has been with GMSA for almost five years and is excited about his new role.
The globally-renowned Chevrolet brand gains a new Product Manager in Lloyd Appanna, who moves to Johannesburg from the Durban regional office.
“With this team we have the ideal skills and personalities in place to properly drive all our products to new levels of success in the South African motoring industry, and GMSA is looking forward to hitting new highs as a company in the course of 2012,” adds Gauld.
This revitalised team is tasked with continuing the remarkable strengthening of GM brands Chevrolet, Opel and Isuzu, highlighted by a year-on-year new vehicle sales increase of 24,4 per cent for 2011 compared to the previous year. This improvement of fortune is itself the result of the unrelenting focus on improving brand image undertaken by GMSA.
Gauld concludes, “We are confident that these new leaders will take GM and its brands to new heights.”

Naamsa Quarterly Review Of Business Conditions

The following is NAAMSA’s quarterly review of business conditions for the South African motor vehicle manufacturing industry, during the fourth quarter of 2011, as submitted to the Director‐General, Department of Trade and Industry.
1. Employment Levels And Trends
The number of persons employed by the South African new vehicle manufacturing industry – comprising the major new vehicle manufacturers and specialist commercial vehicle and bus manufacturers – during the fourth quarter of 2011 may be set out as follows:
Industry Total
Last pay week October, 2011 29 150
Last pay week November, 2011 28 200
Last pay week December, 2011 28 147
Industry employment levels reflect employees on the payroll of vehicle manufacturers.
Compared to the 28 623 positions at the end of September 2011, aggregate industry employment declined by 476 jobs during the fourth quarter of 2011 to 28 147 jobs – a reduction of 1.7 per cent.
The decline in Industry headcount was due primarily to a major manufacturer, during the last two months of 2011, reducing the number of temporary employees.
Employment at all the other major plants remained stable during the quarter. The average monthly Industry employment number for 2011 was 28 292.
2. Number Of Shifts
A single production shift remains the norm. Some manufacturers operate double shifts in selected areas such as machining, press shops, paint shop operations and body shop.
3. Availability And Price Trends Of Components And Raw Materials
3.1 Components Imported Components

In a number of instances, the availability and supply of imported original equipment components, during the fourth quarter of 2011 was severely impacted by the Thailand suppliers’ shutdown as a result of floods.
The disruption caused by the events in Japan during March 2011, compounded more recently by the severe flooding in Thailand, will result in multinational automotive corporations reviewing the design of their respective supply chains, especially in relation to risk.
Local Components
During the fourth quarter of 2011, the flooding in Thailand affected the supply of imported subcomponents and also impacted on the availability and supply of a number of locally produced components.
Ongoing relentless focus on global cost competitiveness and general cost reduction targets continues to pressurise suppliers. Above inflation wage settlements, coupled with sharply higher electricity price increases, continues to add significant risk to suppliers’ competitiveness.
3.2 Raw Materials
Imported Materials
The availability of imported raw materials, where applicable, remained satisfactory. Pricing trends remain a function of exchange rate movements and commodity prices. Increases in prices of steel and natural rubber are anticipated.
Local Materials
Local raw material price movements were impacted by higher commodity prices. The breakdown of the Arcelor Mittal Newcastle furnace caused severe pressure on the supply of forged steels. Local production had to be supported with imported steels. The Newcastle furnace is expected to be in full operation by February 2012.
4. Utilisation Of Production Capacity
On an annualised basis, Industry average capacity utilisation levels showed improvement in 2011 relative to previous years. Fourth quarter capacity utilisation in the car manufacturing sector remained close to record levels.
5. New Investment/Investment Approvals: 2011 Actual And 2012 Projection
NAAMSA reports the industry’s aggregate capital expenditure on an annual basis.
The aggregate projected data for 2012 is based on Capital Expenditure details supplied by the seven major vehicle manufacturers and one truck producer. The projected increase in capital expenditure during 2012 is related in a large part to Automotive
Production and Development Programme (APDP) Investment projects.
6. Business Conditions And Performance Indicators
2011 fourth quarter aggregate industry new car sales at 100 611 units recorded an improvement of 13 741 units or 15.8 per cent compared to the 86 870 new cars sold during the corresponding quarter of 2010. Aggregate industry commercial vehicle sales during the fourth quarter of 2011 at 46 405 units recorded an increase of 5 473 units or a gain of 13.4 per cent compared to 40 932 units sold during the corresponding quarter of 2010.
All sectors registered strong growth compared to the corresponding quarter of 2010. However, fourth quarter sales were mixed in relation to the Industry’s third quarter performance.
Brief comment on the outlook for 2012
On balance, 2011 turned out to be a year of relatively solid growth. Industry trading conditions however remained intensely competitive with over 60 brands and close on 2200 model derivatives, in the new car and light commercial vehicle sectors, competing for consumer’s franchise. In the event aggregate sales for
2011 at 572 241 vehicles registered an improvement of 79 334 units or 16.1 per cent relative to the 492 907 units recorded for 2010.
Export sales also performed relatively well during 2011. However, 2011 Industry vehicle exports of 272 457 units remain below the original projections for the year of exports of over 300 000 vehicles. Nevertheless, the 2011 exports represented the second highest annual export figure on record and reflected an increase of 32 992 export vehicles or an increase of 13.8 per cent on the aggregate export number of 239 465 units in 2010.
New vehicle sales during 2012 would remain a function of the performance of the domestic economy. On the assumption that the South African economy would grow, in real terms, by about 2.7 per cent and taking account of the prevailing historic low interest rates, improved vehicle affordability, new model introductions and easier access for consumers to vehicle financing, as well as continued strong demand by the car rental Industry ‐ NAAMSA’s projection for 2012 translated into an expected improvement of about 7.5 per cent in domestic sales volumes for the year.
Export sales would remain a function of the performance and direction of global markets. Vehicle exports into Europe were likely to soften as a result of the recession and debt crisis in the Eurozone, however, projected higher exports to African countries and factoring in the contribution of the Ford global compact vehicle new export programme – should enable the Industry to record growth. 2012 aggregate exports were estimated to reach about 301 000 vehicles compared to the 272 457 vehicles exported in 2011. The standard attached schedule reflects latest projections of industry sales, production, exports and imports.
Nico Vermuelen