NEW VEHICLE MARKET ENDS OFF 2008 ON DISAPPOINTING NOTE 

 The South African motor industry recorded a disappointing 21.1% decline in new vehicle sales during 2008 compared to 2007, concluding the year on a total sales volume of 533 327 units.  Sales were down 25,3% on the record sales of 714 325 units attained in 2006. The passenger car segment suffered the steepest decline namely 31,6% compared to 2006, and 24,3% compared to 2007.

 This is according to the annual results released by the National Association of Automobile Manufacturers (Naamsa) and Associated Motor Holdings (AMH) this week.

According to Brand Pretorius, Chairman of McCarthy Motor Holdings, the main reasons for this decline in sales, especially in the passenger vehicle segment, are low levels of consumer confidence as well as the deterioration in vehicle affordability due to price increases, a higher interest rate and lower trade-in prices.

 "Furthermore," says Pretorius, "much stricter lending criteria and consumers' disposable income coming under pressure due to high inflation and rising fuel prices, also had a harmful effect on demand for new cars."

 The depressed state of the vehicle market during 2008 was amplified by the fact that both the Light and Medium Commercial segments recorded lower sales.

 Where Light Commercial Vehicle (LCV) sales for 2007 broke through the 200 000 units barrier for the first time, 2008 saw a 17,1% drop in sales to 169 480 units, marking a return to the sub-200 000 mark.

 The Medium Commercial Vehicle (MCV) segment concluded the year on 12 143 units, an almost 20% drop on the previous year's performance of 15 168. The Heavy Commercial Vehicle (HCV) segment saw a 7.6% decline in sales to 6 956 units.

On a positive note, the 14 056 units sold during 2008 in the Extra Heavy Commercial Vehicle (HCV) segment represents an increase of 7.4% on 2007's results and are an all-time high record. Similarly, the country's bus sales experienced a substantial 18.3% increase in sales from 1 275 units in 2007 to 1 508 in 2008.

 Pretorius attributes the drop in total commercial vehicle sales to a slowdown in economic growth and a decline in business confidence. Corporate earnings in the mining, retail and manufacturing sectors were also under severe pressure, which lead to the postponement of vehicle purchases, in some instances.

"The year 2008 was characterised by great hardships, brought about by the global economic and financial crisis, similar in magnitude to the Great depression of 1929, as well as unprecedented turmoil and volatility. We were indeed hit by the "perfect storm". But the motor industry should not let this crisis be for naught. Instead we should learn from the challenges we have endured and use them as a springboard from which to restructure, re-invent and refocus our business models," concluded Pretorius. 

OUTLOOK FOR MOTOR INDUSTRY STILL HOPEFUL DESPITE GLOOMY 2008

2008 was a year characterised by great hardships, brought about by the global economic and financial crisis, similar in magnitude to the Great depression of 1929, as well as unprecedented turmoil and volatility. But the motor industry should not let this crisis to be for naught. In stead we should learn from the challenges we have endured and use them as a springboard from which to restructure, re-invent and refocus our business models.

This is according to Brand Pretorius, chairman of McCarthy Motor Holdings, as he commented on future prospects for the South African motor industry at a media conference earlier today.

Pretorius foresees a further decline of 9,4% in the total vehicle sales during 2009 compared to last year's figures, to 483 000. Passenger vehicle sales are expected to decline by 8,9% to 300 000 units and Light Commercial Vehicle (LCV) sales by 9,4% to an estimated total of 153 500 units.

Despite their remarkable performance over the past few years, Medium Commercial Vehicle (MCV) sales are likely to drop from 12 143 in 2008 to approximately 10 500 in 2009, and Heavy Commercial Vehicle (HCV) sales are set to decline significantly by 15,6% to 19 000.  It is likely that all market segments will experience a very tough first half, with sales anticipated to show a meaningful improvement in the second half of the year.

"One of the key challenges faced by the local motor industry for 2009 is planning for the future in an increasingly volatile international and local environment," says Pretorius. "Furthermore we are confronted by the dire need to protect export volumes, enhance new vehicle affordability, ensuring acceptable levels of production capacity utilisation and containing job losses."

In addition, Pretorius believes that remaining viable in the light of lower volumes, deteriorating margins, substantial fixed costs and high levels of interest bearing debt, as well as meeting ever-increasing customer expectations will also make for an increasingly challenge-filled year ahead.

According to him, other possible negative influences to be prepared for include vehicle price increases of about eight to ten percent brought about by Rand depreciation, ongoing low levels of business and consumer confidence, as well as large-scale retrenchments and a GDP growth of less than 1%. 

"On a more positive note," says Pretorius, "some of the factors which should have a stimulatory effect on vehicle sales during 2009 include, substantial reductions in fuel prices which should boost disposable income by an estimated R3 billion per month, and salary and wage increases above inflation."

With business and consumer sentiment expected to improve in the run up to the 2010 Soccer World Cup, Pretorius believes that all market segments should experience some degree of growth over the medium term. "Interest rates should drop to approximately 12,5% and inflation to 7% during 2009, while government expenditure on infrastructure is set to accelerate.

"Furthermore, a buyer's market is likely to prevail in the motor industry as manufacturers, importers and dealers will compete aggressively for market share," said Pretorius.

"Bearing all this in mind, 2009 might impart on us the most competitive market ever, characterised by the widest range of vehicles available and intense, price based competition," continued Pretorius.

"Looking ahead, McCarthy aims to continue making meaningful progress in terms of transformation within our company, in line with BB-BEE Codes of Good Practice," said Pretorius. "Also, we intend to maximize utilization of the many synergies which exist between McCarthy and our holding company Bidvest."

For the year 2009, the McCarthy Group aims to sell 95 000 new and used vehicles, an effort that is to be boosted as the company establishes Chery as the leading Chinese brand in the local market.

According to Pretorius the motor industry as a whole needs to invest much effort during 2009 in reinventing and restructuring their business models, so as to overcome the negative effects of the past year.

To this end, "McCarthy strives to improve the viability of our dealer network through further rationalization and consolidation, cost cutting and reduction in asset levels, as well as a renewed focus on used car sales, parts and service and supplementary income. Moreover, we intend to grow our financial services business and gear up Budget Car & Van Rental for the Confederations Cup and 2010 Soccer tournaments."

 "McCarthy also intends further expansion of McCarthy Heavy Equipment and entrenching the McCarthy name in consumer's minds as the dominant brand in used vehicle retailing," stated Pretorius. 

Pretorius is of the strong belief that the South African motor industry is certainly not set to collapse during 2009. "Relatively speaking, the South African motor industry is currently in a better state than that of the United States and Europe and the reputable players are likely to survive," concluded Pretorius.

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