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Iemas’ commentary on the NAAMSA new vehicle sales and exports report for August 2019

Iemas’ commentary on the NAAMSA new vehicle sales and exports report for August 2019

The new vehicle sales figures released by the National Association of Automobiles Manufacturers in South Africa (NAAMSA) are 45 537 for the month of August, a welcomed 1 900 month-on-month improvement in units sold in July. However, the results showed a decrease of 5,1% compared to August 2018’s 47 977 units, which is a reflection of the overall decline in new vehicle sales. According to Iemas Financial Services CEO, Banie van Vollenhoven, “During the first eight+ months of this year, the vehicle sales industry was under a lot of pressure due to uncertainty surrounding various economic factors which influenced consumer behaviour and indeed financial decision-making”.

Macro economic changes that we experienced recently include Fitch’s Ratings’ credit rating downgrade to negative and the increased unemployment rate of 29% - both unfavourable to the consumer’s credit appetite. On the upside, the interest rate decrease of 25 basis points (decline from 10.25% to 10,0%) and the minor petrol price reduction (although expected to hike again in September) will have a nominal, though positive impact on vehicle sales for the remainder of the year.

For August, the most sold vehicle brands were Toyota, Volkswagen and Nissan in addition most sales came from dealerships (81,6%), rentals industry sales (12,6%), industry corporate fleets (3,9%) and government (1,9%), which is in line with the past trend and does confirm the importance of the individual buyer in this market.

With a weaker currency, export-based businesses are taking advantage of the foreign exchange rates, as such vehicle export sales showed a year-on-year growth of 22%. A new month record was achieved with 44 566 vehicles sold in August 2019 compared to 32 341 vehicles sold in August 2018. A positive for manufacturers amidst the declining local sales performance over the past months. 

Despite uncertainty in the market and fluctuations in vehicle sales trends, commercial vehicle sales are expected to increase in the coming months as already seen in August. Van Vollenhoven explains, “As we move towards the last quarter of the year, vehicle sales are expected to pick up nominally as a result of consumers’ willingness to increase their spend as well as dealerships ramping up year-end specials and incentives – many with buy now, pay later promotions.” Added to this, the recent growth in private sector credit, from 6.88% in June to 7.19% in July shows that there could be increasing credit demand for lenders. 

However, the vehicle industry should not get too excited as consumer debt-levels are still high with the debt-to-income ratio at 72.7%. As such, consumers are expected to be more conservative in their spending in the coming months therefore the local vehicle industry and related businesses, have to look at new and innovative ways to adapt to inconsistent consumer behaviour and industry trends. Being able to create solutions that better suits their pockets and expectations is critical.

“In light of the current industry and economic fluctuations, and the impact this has on consumers and their ever-changing needs, we are in the process of enhancing our financing offerings. Iemas recently appointed Maria Feiteira as Managing Executive, responsible for all our financing solutions,” says Van Vollenhoven. Maria has over 30 years’ experience in retail banking with a specialised focus on sales leadership particularly in vehicle and asset financing. “I am excited about this opportunity to create financing solutions for consumers within the context of a co-operative,” says Feiteira.

Unlike traditional banks that have customers, the Iemas co-operative has members who become part of the business when they take up any of the products on offer. Members of the co-operative have a say in the management of the business as well as a share in the profit through an annual reward payout. These are allocated at the end of the financial year via direct credits and through a special reserve fund on which the member earns, currently 6.5% interest. These exclusive member benefits are aimed at rewarding loyalty.

“Iemas also invests in tailored financial education of members, which ultimately contributes to their financial savviness and wellness. Our aim is to offer affordable financial solutions and services, particularly vehicle finance and insurance, and continuously improve our members’ financial knowledge,” concludes Van Vollenhoven.

About Iemas Financial Services (Co-operative) Limited

Iemas Financial Services is a co-operative that offers a wide range of affordable and competitive financial products and services to over 160,000 members across South Africa.

At the heart of Iemas’ co-operative business model is the principle that the organisation is owned by, and operated for the benefit of those using its services (referred to as its members), and Iemas members annually share in the profits of the organisation based on the products/services they use during the year.

Iemas has co-operation agreements with over 600 employers authorising the co-operative to offer its financial products and services to their employees.

With a history spanning over 80 years, Iemas has extensive experience in providing financial services and its product portfolio includes: Vehicle financing | Comprehensive insurance solutions | Educational loans | Secured and unsecured loans | a Purchase card | Housing solutions/mortgages.

Insurance products are offered through Iemas’ subsidiary Iemas Insurance Brokers (Pty) Ltd. Iemas Financial Services (Co-operative) Limited is a registered credit provider (NCRCP 1332) and Iemas Insurance Brokers (Pty) Limited is an authorised financial services provider (FSP 47563).

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Automotive Export Manual 2019