The downturn for the South African motor industry is proving far more severe than even the pessimists among business commentators could have predicted.

Total vehicles sales for the first half of 2008 – including the non-reporters to NAAMSA – fell 15,5 per cent to 287 518 units compared to the 340 453 units sold in the first six months last year. Most alarmingly, however, was the freefall in new passenger vehicle sales, which are now 19,2 per cent down on the position that it was at, at the end of June last year, with little hope of a reprieve.

Associated Motor Holdings (AMH), which does not give a breakdown of its sales in terms of makes and models to NAAMSA, is now feeling the cold wind after several years of strong growth. Its first-half sales had shrunk by 23,3 per cent to 25 019 units year-on-year.

Light commercial vehicle sales, which have held up fairly well during the past year, are now starting to slide, and were 10,3 per cent down year-on-year. Medium commercial vehicle sales (3 500 – 8 500kg GVM) are also moving downward, with a 4,4 per cent fall at mid-year. Heavy trucks (8 501 – 16 500kg GVM) remained in positive territory, 5 per cent up on a year-to-date basis, but it is in the extra-heavy vehicle category (more than 16 500km GVM) that the real growth continues, with sales up by 17,1 per cent.

The blood is flowing at dealerships, manufacturers and distributors. Fuelled by rising interest rates, ongoing hikes in vehicle retail prices, consumer confidence plunging at its fastest rate in 24 years, business confidence is dipping and the fuel price is rocketing to unprecedented heights.

It is predicted that as many as 100 new vehicle dealerships (out of about
1 700 in the country) will close during the downturn. In fact, many of them have closed their doors already or been consolidated with other branches in the case of the groups.

Although the groups are reluctant to release these figures, Combined Motor Holdings (CMH) have already shut five outlets, resulting in 156 job losses. McCarthy Motor Holdings have closed four and Barloworld Motors shut down two, as the retail motor industry have seen sales in decline for 16 consecutive months.

Many of these dealerships are under huge financial pressure, as the majority have recently built new premises or upgraded existing facilities to cater for the hope of increase in sales and service. The chairman of the National Automobile Dealers’ Association (NADA), Eric Scoble, believes that less than half the dealers in the country were profitable in June.

The manufacturers are also taking strain, with General Motors SA (GMSA) planning to retrench about 520 jobs. In addition, 300 employees have left the company since the beginning of the year in terms of a voluntary retrenchment programme.

Volkswagen SA and Nissan SA have negotiated short-term arrangements with employees to work less time to reduce the impact of the sales downturn.

Some commentators are saying that the challenges facing all sectors of the industry are as tough as, or tougher than, any that they have faced in the past – even those who experienced the industry when it was operating under political sanctions in the previous century. The problem now is that all sectors of the industry have geared up to make and sell much larger volumes than it is now, and with little growth over the short to medium term.

OVERALL MARKET

Toyota demonstrated the strength of its brand when the economy took a downward turn, by increasing its market share substantially year-on-year, going up 1,6 per cent to 25.7 per cent. Although, its volume did shrink from 74 146 in the first half of 2007 to 67 268 units sold a year later. The biggest loser was its archrival, Volkswagen, which saw its share of the total market shrink by 2.5 per cent to 14.3 per cent.

The major success in terms of infiltration was Mercedes-Benz, buoyed by strong sales of its new C-Class car, which is now in full-scale production, as well as Mercedes’ comprehensive range of trucks.  This resulted in a boost in share of 2.1 per cent from 7.7 per cent to 9.8 per cent.

The only change in the top 10 positions in the overall market came at the bottom of the list, with Renault being surpassed by the Fiat Group. Renault is having a torrid time, with its sales and market share more than halving in the past year from 5 025 units to 2 192 units and from 1,6 per cent to 0.8 per cent.

Its French rival, Peugeot, is also having a tough time. Although it sold more vehicles than Renault, Peugeot sales slumped 66 per cent and penetration is down to a lowly 0.9 per cent.

The Indian companies, Mahindra and Tata, also fared poorly. Mahindra lost 82 per cent in total volume, slumping to 974 units from 1 775 sold in the first half of 2007, while Tata saw its sales fall 69 per cent to 4 690 units from
7 923 the year before.

PASSENGER CARS

Toyota/Lexus regained the lead in the passenger car market in its intense battle with Volkswagen/Audi/SEAT. The former pushed up its shared by 0.6 per cent to 23.1 per cent, while sales of VW’s  trio of brands slipped by 3,1 per cent - the biggest fall by any manufacturer – to 22,5 per cent.  The gap between the two protagonists was 1 034 units in favour of Toyota at the mid-year point this year, compared to a comfortable lead of 5 823 units for Volkswagen at the same time last year.

There were significant changes further down the top 10 list too. Mercedes-Benz, which grew its share by 2.4 per cent to 10,4 per cent, has overtaken both Ford and General Motors to move into third place, pushing the two multinationals down the ranks to fourth and fifth respectively. BMW retained sixth spot, while Honda had to give up seventh place to Nissan – although only by a margin of 82 units.

Land Rover/Jaguar took a surprising ninth place when one considers the comparatively high starting price of its “entry level model” – a Freelander! Chrysler SA remained at the bottom of this group of top 10 sellers.

Renault, which had been in ninth a year ago, has now slumped to 13th, trailing behind Peugeot and Tata.

Returnees to the market, Suzuki – now having broken its ties with GM, doing it alone - were very upbeat with its first month’s performance. In June, sales of 230 units equated to 0.6 per cent of the total market. However, many of these sales were probably to the dealers themselves, as demos, but in Suzuki’s defence it still has a very limited range on offer.

Italian super car makers Ferrari (sales up from 30 to 53) and Maserati (sales up from 13 to 34) had good half years. Although rivals Porsche and Lamborghini fell, the former losing 31 per cent in volume, they are still selling a not inconsequential 358 units, while Lamborghini volume dropped from 16 to 12.

The VW Polo hatch and its Classic sedan sibling retained the “most popular car in SA” tag, even though it lost slightly (0,45 per cent) in share, dipping to 9,4 per cent. There was an amazing tie on 12 834 sales between the Toyota Corolla/Verso/Auris trio and the Toyota Yaris hatch and sedan, each accounting for 8,3 per cent of the car market.

Another surprise was the Mercedes-Benz C-Class rocketing from eighth midway through last year, when production was still ramping up, to third place this year, with share growing by the biggest margin at 2,7 per cent and moving up to 6,1 per cent. The VW CitiGolf continued to defy its critics in some of the local media by holding on to fourth place, BMW retained fifth spot, but the Opel Corsa leapfrogged over the Golf/Jetta to sixth spot.

Newcomer Mazda2, the South African and World Car of the Year, came into the rankings at an impressive eighth position, ahead of the Toyota Fortuner and Avanza, with the Ford Fiesta and Nissan Tiida falling off the top 10 list. The latter’s volume has dropped, going from 4 473 units sold in the first half of 2007 – many to rental companies – to only 1 374 units year-to-date.

LIGHT COMMERCIAL VEHICLES

Toyota, with strong sales from its extensive Hilux bakkie and Quantum van/minibus ranges, pumped up its share of the light commercial vehicle market by 3,5 per cent to an even more dominant 32,5 per cent. This market remained static in terms of the sales volumes of the various manufacturers from first to sixth, being: Toyota, General Motors, Ford, Nissan, Mercedes-Benz and Volkswagen.

The loss of the “evergreen” Nissan 1400 half-ton bakkie from Nissan’s range resulted in a big fall in volume (down 5 782 units) and penetration (down 4,7 per cent). This situation will obviously change when the Dacia Logan-based Nissan N200 joins the range in the future.

Chana has jumped from ninth to eighth position and is followed by another Chinese brand, GoNow, with Fiat slipping from eighth to 10th spot.

The big surprise is Tata, which has grown its range but has lost substantial volume. Down by almost 60 per cent from 2 218 units sold in the first half of last year, when it was in seventh position, to only 903 sales, and 11th place at the end of June 2008, losing 1,2 per cent of share in the process.

The Toyota Hilux and Opel Corsa Utility continued to lead the way at the top two places in terms of individual LCV models, while also being the pacesetters in the one-ton and half-ton segments respectively. There was a surprise in third place, which was filled by the Toyota Quantum, which appears to be the vehicle of choice for taxi operators under the Taxi Recap Programme. At the middle of last year the Quantum range of vans and minibuses had been only the eighth best seller among LCVs.

GMSA’s revised Isuzu KB range retains fourth spot, while the Ford Bantam has slipped from third to fifth. The Nissan Hardbody, now renamed NP300, has gone down from fifth to sixth and Ford’s Ranger went from sixth to seventh, ahead of the Colt, Nissan B 140 and Mazda BT-50.

As mentioned earlier, the Indian LCVs fared poorly.

Mahindra’s Bolero sales fell from 436 to 152, while the Scorpio pick-up did even worse, as sales of this pick-up fell from 292 units sold in the first half of 2007 to only 92 in the same period this year.

The fall-off was far greater for Tata as sales of its Telcoline bakkie tumbled from 2 218 to 354, while the new “Worker” derivative sold only 368 units.

MEDIUM COMMERCIAL VEHICLES (3 501-8 500kg GVM)

Toyota’s Dyna and the Mercedes-Benz Sprinter continued their long-standing battle for supremacy in the medium commercial vehicle category and both increased volume slightly in a falling market. Dyna, like the other Japanese makers, does not have a van in its line-up but still managed to hold the upper hand against the Sprinter, which sells mainly vans and midi-buses.

Once again Tata’s challenge is falling away. At the middle of last year it was fairly close behind Dyna and Sprinter but it has lost out substantially in the past 12 months. Volume is down 46 per cent and its share has fallen 4,4 per cent. It is now not far in front of Isuzu, while Nissan Diesel, Iveco and Volkswagen are closely grouped together with sales of just over 500 units in the first six months of this year.

Ford has stopped importing the massive F250 pick-up and is dropping out of this market, where it held ninth spot a year ago.

HEAVY COMMERCIAL VEHICLES (8 501-16 500kg GVM)

The status quo remained in terms of the rankings of the various manufacturers and distributors in the heavy commercial market that has showed slight growth this year.

Toyota Trucks’ Hino 500-Series increased its dominance by growing penetration by 1,5 per cent to 26 per cent, thereby extending its lead over Nissan Diesel, which is now under attack by Isuzu, which was only 11 units behind. Tata also lost out in this segment of the commercial vehicle market, shedding 3,9 per cent in share from a 24 per cent drop in sales, but it was still comfortably ahead of the closely-matched Mercedes-Benz and Mitsubishi Fuso contenders in this segment.

EXTRA-HEAVY COMMERCIAL VEHICLES (MORE THAN 16 501kg GVM)

This territory, which is still exhibiting strong growth, is still the preserve of Mercedes-Benz, which grew its share 0,8 per cent to a truly dominant 19,7 per cent, from sales of 1 456 units. This was well ahead of the three companies battling for second place – its own Freightliner division (935 units sold), MAN (915) and Nissan Diesel (908).

Freightliner benefitted from the regrouping by Navistar to rebuild its International brand and was the biggest winner in terms of a market share gain, going up 4,6 per cent to 12,6 per cent and thereby moving up from sixth to second on the half-year sales chart.

As expected, Navistar’s International was the biggest loser, dropping 4,3 per cent in share, falling from fourth to eighth in the rankings. Other losers in this category were Tata and Scania (both down 1,5 per cent), Supergroup’s Chinese Powerstar (down 1,2 per cent), and Volvo Trucks (down 1 per cent).

BUSES (OVER 16 500kg)

The bus market grew 43 per cent in the period under review, but this is off a small base, with only a few serious players – MAN, Mercedes-Benz and Scania. MAN continued to set the pace, but on this occasion Mercedes-Benz was ahead of Scania at the half-year mark, to reverse the positions these two held at the end of June last year.

LOOKING AHEAD

It appears as though the outlook for the rest of 2008 and going into 2009 will see little or no relief for an industry under intense pressure on most fronts. Further increases in the interest rate, rising local inflation and very high levels of personal debt are expected to continue to slow economic growth.

Some of the local manufacturers are in the fortunate position of having high volume export contracts which can help to cushion the local pressure on sales, but some export markets are also slowing down, which will exacerbate the situation for the local companies.