The sales boom that South African vehicle manufacturers and importers have been enjoying for the past two years seems to be slowing, even though 2007 will see record sales for the second successive year.

Interest rate hikes, the weakening of the rand against the US dollar and the Euro, and three increases in the price of steel in five months have contributed to rising prices and the slowdown in sales.

September saw a substantial decline in year-on-year growth in new car and light commercial vehicle sales, even though the 63 253 sales (Naamsa reporters and Associated Motor Holdings combined) was the best yet for this month. This figure was only 2 590 short of the monthly record set in August.

Going forward, the outlook does not look as bullish as the industry had expected. Further interest rate hikes loom, and one industry commentator went so far as to say that further growth in the market was left "in the hands of the corporates".

Manufacturers are also getting back into a cycle of regular price increases after the virtual "price freeze" over the past three to four years. Rates of increase will depend on exchange rates and rising manufacturing costs, such as the recent hike in steel prices.

The industry also faces possible shake-ups when the Trade and Industry Department's mid-term review of the Motor Industry Development Programme (MIDP) is published.

Export incentives currently available through the MIDP will likely be replaced by production allowances to allow the programme to meet the regulations stipulated by the World Trade Organisation (WTO). Parties involved have suggested that, as with the Australian model, production should take place within South Africa, whether or not vehicles are intended for export or domestic markets. The Australian motor industry has been consulted as part of the MIDP's review. The mid-term review, which will likely be released in November, is expected to signal a move in this direction within the next few years.

However, for now the scene is set for another record year. Despite the slowdown, total sales by Naamsa reporters for the first nine months of 2006 amounted to 484 152 units. This was an improvement of 15,8 per cent over the 418 020 units sold in the first three quarters of 2005, and excludes the 50 016 vehicles sold by the Imperial Group's Associated Motor Holdings.

OVERALL
Passenger car sales for the nine-month period under review were up 15,9 per cent, light commercials by 14,7 per cent, medium commercials were up by 19,6 per cent, while there was a lot of action in the truck segments, with heavy truck sales up 27,9 per cent and extra heavy trucks up by 22,2 per cent. Buses showed growth of 15,8 per cent.

Toyota retained its top position in the overall vehicle market above Volkswagen. Both manufacturers showed slight increases in share, though Toyota expects to increase the gap in the final quarter as its new paint shop becomes fully functional.

Interestingly, compared with the same period last year, there were no changes in the top 10 rankings on a year-to-date basis. Ford, in fourth place, has managed to close the gap slightly on third-placed General Motors SA, while DaimlerChrysler holds fifth despite losing 1,4 per cent in share - the biggest drop by any manufacturer. Nissan are sixth, also showing a small drop in penetration, with BMW seventh, Renault eighth, and a fast-closing TATA in ninth, ahead of Fiat Auto.

PASSENGER CARS
Volkswagen continues to lead the passenger car segment with a 24,4 per cent share, but could face a strong challenge from Toyota as the end of the year approaches. The gap between the two rivals at the end of September last year was 11 589 units, which has shrunk to 3 568 units in 2006. Toyota's car sales have increased by 3,8 per cent - the biggest jump in the industry - mainly on the back of strong Yaris sales.

Volkswagen South Africa's decision to position its new Seat brand as a premium range has been revised. Seat sales of around 100 units per month fall short of its projected 300 units a month, and the company has dramatically repositioned the brand. Prices have been adjusted in the consumer's favour, with those who bought at the higher prices being refunded.

Beneath the two dominant players, a 1,9-per cent drop in market share has seen DaimlerChrysler SA slip into fourth position behind Ford Motor Company of Southern Africa. General Motors SA remains in fifth spot, despite losing one per cent in penetration. With 24 526 units sold, BMW retains sixth position well ahead of Renault (12 501 unit sales), which lost 1,4 per cent in share. Honda's sales rocketed by 65 per cent, pushing it into ninth place ahead of Tata, while Peugeot slipped from ninth to eleventh position.

There is a titanic struggle for top position among passenger car models available in South Africa. At the end of the third quarter of 2006, VW's Polo and Polo Classic were only 108 units ahead of Toyota's Corolla/RunX and Corolla Verso. At the same time last year, the Toyota trio was 5 262 units ahead.

The Toyota Yaris is the year's surprise package, moving straight into third place after less than twelve months on the market. VW's CitiGolf, the remaining long-life entry level model range in the country, continues to show its resilience by hanging on to fourth position, ahead of GMSA's Corsa range, which lost 1,3 per cent in share on a year-to-date basis.

BMW's 3 Series retained sixth spot, while its three-pointed star rival, the Mercedes-Benz C-Class went from fifth to seventh place. Ford's Fiesta dropped from seventh to eighth, and TATA's Indica/Indigo/Indigo station wagon remained in ninth, despite losing 0,5 per cent in share. Audi A4 took over the bottom spot in the top 10 at the expense of the Mazda 3.

The Toyota Fortuner cemented its place as the country's most popular sports utility vehicle (SUV) with 3 095 units sold since launch in March, putting it well ahead of the former segment leader, the Nissan X-Trail. Nissan sold 2 404 units of its SUV in the nine months to the end of September.

LIGHT COMMERCIAL VEHICLES
GMSA, with two strong sellers in the half-ton Corsa Utility and one-ton Isuzu KB, lifted its share by 1,5 per cent to a segment-leading 25,3 per cent. Toyota's share tumbled by 5 percentage points to 23 per cent, while FMCSA held on to third place with its Ford and Mazda offerings, ahead of DCSA.

In individual model ranges, the Hilux held sway at the end of the third quarter, scraping ahead of the Corsa Utility by a slender 33 units. Compare this to a massive gap of 8 094 units a year previously.

MEDIUM COMMERCIAL VEHICLES
Sales of medium and heavy trucks are holding up better than that of passenger cars and LCVs, with MCV sales in the first nine months of 2006 totalling 10 678 units. Year-to-date, the 8 928 units were sold in 2005.

Toyota's Dyna continues to lead MCV sales, but its market share plummeting 3,6 per cent market share as Tata's share grew by two per cent.

DaimlerChrysler (Mercedes-Benz and Mitsubishi Canter), Nissan Diesel and GMSA's new Isuzu range, all held station in third, fourth and fifth positions, respectively. However, Iveco has shifted up from seventh to sixth, with Volkswagen climbing eighth to seventh positions. Ford, with its F250 pick-up, is finding this a tough market and has slipped back to eighth, with Peugeot's Boxer range holding on to ninth. The embattled Russian GAZelle minibus taxi slots in at tenth with 308 units sold in the first nine months of this year.

HEAVY COMMERCIAL VEHICLES AND TRUCKS
Toyota has another of its trucks ranges under threat. Hino held a slender lead at the end of September 2006, but lost 1,7 per cent in share to allow Nissan Diesel to claw its way to a shortfall of only 39 units. GMSA's Isuzu range managed to hold on to third place, despite shedding 3,7 per cent in share, with DaimlerChrysler maintaining fourth spot despite a 1,9 per cent drop in market share.

The big winner in the heavy truck segment is undoubtedly TATA, which stayed in fifth spot but closed the gap on DCSA from 438 at the end of September 2005 to only 16 units a year later. Impressively, this equated to a 280 per cent growth in volume and a gain share of nine per cent.

TATA is also becoming a player at the top end of the market and here again it showed strong growth, moving up by 4,6 per cent from 2,8 per cent to 7,4 per cent on sales that more than tripled in the period under review.

DaimlerChrysler managed to hold on to its leadership position in the Extra Heavy Truck segment, by a wide margin (2 400 units to 1 348 for second-placed MAN), but it still lost 2,3 per cent in penetration within the segment. The Imperial Group's Tyco Trucks showed some growth to retain third position, while Nissan Diesel moved up from fifth to fourth despite no increase in market share. The reason was a big drop for Volvo Trucks (losing 2,6 per cent in share) and falling from fourth to sixth, below TATA.

Scania went from sixth to seventh, pushing Toyota's premium Hino's down to eighth.

As mentioned previously, the bus market showed some growth, with MAN, DaimlerChrysler, Scania and Volvo still the major players. However, a shake up is expected in this segment when Volkswagen enters the market. The Indian and Chinese manufacturers cannot be far behind.

Looking ahead, we see record sales for 2006 - possibly exceeding 700 000 units for the first time - but what is important is whether or not consolidation will continue on the back of expected increases in vehicle prices and the interest rate.