South Africa Autos Report Q3 2012

Vehicle sales in South Africa grew by 9.5% year-on-year (y-o-y) over the first five months of 2012
according to the National Association of Automobile Manufacturers of South Africa.
In light of these figures and our bullish outlook for consumer and business sentiment for the year, BMI is
revising down slightly our sales forecast for 2012. We now expect total sales to rise 15% this year, down
from our previous forecast of 19.9%.
Vehicle sales in the country have been gradually recovering since the low point of 2009, although they
have not yet recovered to the 2006 peak.
BMI forecasts the passenger car segment to grow by 18.1% in 2012, down from our previous estimate of
a 23.6% rise. However, we are encouraged that this is still a strong growth figure.
We envisage total sales of 655,700 this year and estimate 465,908 passenger car sales will be shifted.
Despite the downward revision, this pushes overall sales towards the previous high of 2006, which saw
overall sales of 715,588 and 481,577 cars – meaning that this record figure has now been passed –
indicative of a return of strength after the global financial crisis.
We believe that several factors still suggest a broadly positive outlook. Several factors bode well for
consumer spending: relatively contained inflation (5.7% y-o-y in May 2012), high nominal wage growth,
and the low interest rate environment which should keep a lid on debt servicing costs (see our online
service, June 25 2012, ''Downside Risks For Growth'').
Certainly, the latest data on credit extended to private households bodes well for spending: credit rose by
6.8% y-o-y in March 2012, up from 6.6% in February and 6.1% in January. Relatively buoyant consumer
spending and readily available consumer credit will both serve to drive passenger car sales, and has
driven our still relatively bullish forecasted growth figures.
However, we believe that there are some downside risks to our amended forecasts. Consumer confidence
could take a hit if the eurozone debt crisis escalates further, prompting a tightening of the purse strings.
Similarly, a weakening of the domestic housing market (from its already subdued state) could provoke
some belt-tightening. These factors could dampen growth in the passenger car market.
BMI forecasts commercial vehicle (CV) sales to increase by 8.1% in 2012. This is somewhat more
bearish than our previous annual forecast of 11.6% and is predicated on our dampened outlook for
investment.
South Africa Autos Report Q3 2012
© Business Monitor International Ltd Page 6
BMI forecasts real fixed investment growth of 1.0% in 2012, which is very subdued and would mark a
notable slowdown from the 4.4% growth seen in 2011. Our view is largely predicated on the likelihood of
global risk appetite remaining weak amid a protracted crisis in the eurozone and a potential sharp
slowdown in China. South Africa''s manufacturing sector is particularly vulnerable in this regard, given its
reliance on external demand.
On the domestic front, political risk could be an important factor weighing on investment, given the
uncertainty surrounding the December 2012 election. The latest data on business confidence from the
South African Chamber of Commerce and Industry certainly suggest that investment could stagnate: the
business confidence index stood at 92.8 in May 2012, relative to 100.0 in 2010. This relatively weak
investment and business environment could dampen sales in the commercial vehicle segment.