WesBank looks into its crystal ball

WesBank looks into its crystal ball
MOTORING NEWS – WesBank, South Africa’s leading vehicle financier, has forecast that total new vehicle sales will decline 12% this year.
Compared to 2015’s industry total sales of 617 691 vehicles, 2016 will end the year with total sales of 543 306 units. The forecast is an annual fixture on the South African motoring calendar and formed part of the recent SAGMJ WesBank Car Of The Year banquet dinner.

WesBank CEO Chris de Kock cited many of the current macroeconomic headwinds as reasons for an expected decline in vehicle sales this year. WesBank’s forecast is based on an expected low gross domestic product (GDP) growth rate, changes in the interest rate, inflation, a downgrade of South Africa’s credit rating and the deterioration of the rand.
Over the next three years the interest rate is likely to be hiked 125 basis points, keeping inflation within target bands. However, WesBank does expect that South Africa’s sovereign credit rating will be downgraded to “non-investment grade” or “junk” status. Finally, the rand will continue to decline against the US dollar, with WesBank forecasting that in 2019 the American currency will sit at R17,20.
“The movement of the rand will be key for new vehicle sales performance in South Africa. A deteriorating currency will force manufacturers to increase prices more aggressively. This will push new vehicle price inflation well outside that of headline consumer price index (CPI), thus sending more buyers to the used car market,” said De Kock. “Interest rates will also play an important role in affordability and the demand for credit, as has historically been the case.”
In line with seasonal trends in the market, WesBank has staggered its forecast for 2016’s vehicle sales performance. The financial institution predicts that in the first half of 2016 industry sales will be down 10% year-on-year, with passenger car and light commercial vehicle (LCV) sales declining 10% and the remainder of the commercial vehicle segment falling 12%.
The second half of 2016 will be tougher, mainly as a result of accelerated price increases for new cars as well as higher interest rates. De Kock predicted passenger car sales will decline 15,5% year-on-year, with LCVs only down 10% for the same period. Sales of larger commercial vehicles will slide 14,4% year-on-year, as businesses opt to not to replace existing assets with new models.
Combined, the full year will see passenger car sales end down 12%, LCVs 10% lower than last year and commercial vehicles down 13,3%.
After the address by De Kock the evening proceeded with the crowning of the 2016 Car Of The Year, the Volvo XC90. Ford Fusion and Mazda2 were first and second runners-up. The winner was chosen after two days of testing and evaluation by a jury of the South African Guild of Motoring Journalists in January. Car Of The Year has been sponsored by WesBank for 31 years.