It seems the South African motor industry's rather short-lived "honeymoon" period is over and the road now goes uphill. Not only has the overall market (including non-reporters from Associated Motor Holdings) slumped by 14,3 per cent in the first quarter of this year, compared with the same period last year, but the industry has been negatively affected by a multitude of other factors.

The biggest drop in sales was in the passenger car market, which was down 19,1 per cent, with light commercial vehicles (LCVs) falling 7,5 per cent. Medium and heavy commercials continued to show growth, with MCV sales up 8,5 per cent and heavy trucks and buses up 13,5 per cent.

Slack demand resulted in the brakes going on at some production lines, with Volkswagen halting operations at its Uitenhage facility for eight days to "balance stock levels" .Nissan is also planning a shutdown in the near future. In both cases workers will have to take unpaid leave for part of the closure period..

Toyota had a planned mini-shutdown at the end of April, but now that a large percentage of its production is being exported the pressure on the market leader for unplanned closures is diminished.

The weaker rand, high inflation, higher interest rates and other factors such as the rising fuel price are resulting in vehicle manufacturers and distributors in South Africa going back to the quarterly vehicle price increases of the past. Some commentators believe price rises would be sharper if it was not for high stock levels "on rubber." Quarterly price increases vary between 2 per cent and about 4 per cent depending on the model range.

Dealers are under immense pressure, as shown by the recent financial reports of some of the major groups. Dealers now face stiffer competition than at any time in history as more and more brands come to the SA market. There are also, demands from franchisors to spend vast amounts of money in upgrading and expanding facilities, while rising new vehicle prices, falling business confidence, tighter credit and increased overheads due to the ongoing fuel price hikes and higher interest rates are added negatives they have to face.

In addition, established dealers are having experienced staff members lured away by new brands entering the market and setting up retail outlets. This poaching of staff often results in dealers having to up salaries and perks to retain staff, putting even more pressure on the bottom line.

In fact it is now so hot in the kitchen that retail businesses are "going to the wall" or being closed by struggling franchisors, such as Renault. Rationalisation is happening among used car dealers too.

The performance of the listed groups with significant holdings in motor dealerships and wholesale distribution are feeling the strain.

Bid Auto, whose main component is McCarthy Limited, is one of the largest retail operations in the country and it reported disappointing financial results.
Excluding the acquisition of Viamax, the former fleet business of Transnet, Bid Auto's revenue grew just 3,8 per cent to R10 billion and operating profit declined 26,8 per cent to R259,7 million.

The larger McCarthy franchises performed well in difficult trading conditions, but the smaller franchises such as Peugeot, Renault, Alfa Romeo, Fiat and Nissan recorded poor results.

Imperial Holding's motor division, which was once a jewel in that company's crown, is taking strain and undergoing major restructuring. The poor performance of the group's motor retail operations contributed to a 25 per cent slump in overall headline earnings a share to R5,355 in the six months to December.

Revenue in retail outlets and the distributorship business fell 7 per cent year-on-year, while the operating margin declined from 4,5 per cent to 3,7 per cent. The poor performance by its 49 per cent stake in Renault cut income from associated companies by 35 per cent to R83 million. Imperial's share of Renault's loss was R87 million.

Imperial has now announced it is to unbundle and separately list its leasing and capital equipment division. This includes relinquishing the International, Renault and DAF truck distributorships, while still maintaining its retail truck outlets. Imperial will dispose of its aviation divisions, with the exception of NAC, the assets of Commercial Vehicle Holdings and its 66 per cent shareholding in listed Tourvest.

Increased debt levels to fund expansion, coupled with higher interest rates and weaker trading in vehicle dealerships contributed to the 6 per cent decline of Super Group's headline earnings a share to 60c for the six month to December. Revenue from motor dealerships and distributors declined by 4 per cent and operating margins fell to 1,4 per cent.

The slowdown in the vehicle market seems to have scuppered the unsolicited bid for the motor dealerships of Super Group. The September offer had followed an announcement by Super Group in July that it had ended takeover talks after a "major institutional shareholder" had opposed the offer price.

Commercial Motor Holdings (CMH) is another large retail network that has reported a significant downturn in its financial performance.

The financial services groups are also taking strain as the new National Credit Act made it more difficult to sell term products such as insurance. McCarthy claims the effect of this slow down could be as much as R60 million.

OVERALL MARKET

As mentioned earlier, the overall market, with a first quarter total of 154 887 units was 14,3 per cent off the year-to-date (YTD) figure of 180 647 units in 2007. Big losers were the non-reporters from Associated Motor Holdings (AMH), which provides only combined sales figures for its various franchises. Its sales plummeted 24,3 per cent from 18 028 units in the first three months of 2007 to 13 646 for the first quarter of 2008.

Toyota continues to benefit from tougher economic conditions as buyers tend to go for "tried and trusted, no-risk" brands at these times. The 28-year market leader sold 36 831 units and lifted its share from 21,6 per cent at the end of March 2007 to 23,8 per cent for the first quarter of 2008.

By contrast, its nearest rival, Volkswagen, sold only 19 380 units between January and March this year and lost 3,5 per cent in share, sliding to 12,5 per cent , which resulted in the plant shutdown. Competition for third place saw a keen battle between General Motors SA (GMSA) and the Ford Motor Company of Southern Africa (FMC), with GMSA's sales of 18 704 units not only edging up towards VWSA, but also bettering Ford's figure by 373 units. (The gap had been 43 units at the end of the same period a year previously).

Somewhere down the line Ford will have to give up the sales volume it reports from Jaguar and Land Rover now that these brands have been sold to Tata, which will put GMSA in a much stronger position in the local market.

There was no change in positions five to seven, which are held by Mercedes-Benz SA, Nissan and BMW respectively. But Honda overtook Tata for eighth spot and the Fiat Group moved back into the top 10 at the expense of Renault.

This latter company is having a torrid time with complaints of bad customer service, failing sales and heavy financial losses. Renault sales tumbled from
2 560 at the end of the first quarter of 2007 to less than half this figure - 1 149 units - at the end of the same period this year. Rubbing salt into the wound is the fact that it also slipped below its arch-rival Peugeot, which is also having a rough ride.

Other big losers included Chrysler SA, which has split off from Mercedes-Benz SA, and the Indian brands, Tata and Mahindra.

The poor sales figures for Chrysler SA (including the Dodge and Jeep brands) of only 1 193 unit sales (down from 1 895 a year previously) makes one question the viability of the company in view of its many, large dealerships that were built during the days of DaimlerChrysler, as well as its wide product range. Downscaling must be on the cards.

Tata's sales of 2 442 un its in the first quarter of 2008 were almost half the total sold a year ago, while Mahindra & Mahindra sales of only 576 units so far this year was a drop of about 40 per cent over the performance a year ago.

Interestingly, exclusive luxury brands such as Ferrari (sales up from 12 to 27), Porsche (sales up from 205 to 227 units), Maserati (sales up from three to 17) and Lamborghini (sales up from six to eight units) all showed growth during the period under review.

Other brands to improve their sales figure during this period were: MINI, Land Rover, Mazda, Cadillac, Isuzu, Iveco, MAN, Freightliner, Fuso, Mercedes-Benz, Mitsubishi, Nissan Diesel, DAF and SEAT.

Four brands reported first quarter sales for the first time, being the Chinese brands GoNow, Meiya and Foton (the latter two imported by the McCarthy Group) and Hummer, which is being built by GMSA in Port Elizabeth.

However, there are a number of independent importers of Chinese vehicles that are, unfortunately, not reporting sales through NAAMSA, including Great Wall Motors (GWM), Geely, Soyat, Asia Wing, CAM, FAW and DFM.

Another new Chinese brand coming to market shortly is Chery, but its sales will be reported as McCarthy is the importer and already reports sales of its Meiya and Foton ranges).

PASSENGER CARS

Toyota has turned the tables on Volkswagen in the tussle for leadership in passenger car sales. VW lost not only 4,5 per cent in market share, but its best-selling model range, the Polo, was ousted from top spot by Toyota's Yaris. Toyota gained 1,7 per cent in share to move up to 22 per cent of the total car market (including AMH sales).

Ford retained third place by dint of a 2 per cent growth in share - mainly due to strong sales by Mazda and Land Rover - while the biggest winner in the quarter was Mercedes-Benz, which took its share up by 2,8 per cent on the back of strong sales of the new C-Class and was only 66 units behind Ford.

BMW leapfrogged GMSA into fifth place, with Nissan moving up from eighth to seventh, just shading Honda by 88 units. Peugeot moved up from 10th to ninth, with Chrysler SA filling the 10th position. Beleaguered Renault took a big drop from ninth to 11th, as its first quarter sales slipped from 2 474 to 1 104 units in a year.

As mentioned earlier, Yaris became the top selling car range in South Africa for the first time in the first quarter of 2008 with 7 622 units sold. This edged out previous top-seller Polo by 165 units, with the Toyota Auris/Corolla/Verso trio a further 94 units behind.

The new Mercedes-Benz C-Class was the big winner in the quarter, increasing share by 2,8 per cent and moving into fourth position, from sixth a year previously. VW CitiGolf was forced down from fourth to fifth and BMW 3-Series from fifth to sixth in the listing of the top 10 most popular car ranges.

The new Corsa found plenty of buyers to move up from eighth to seventh spot, ahead of the Golf/Jetta duo. Mazda2. which as been voted both World Car 2008 and SA Guild of Motoring Journalists' 2008 Car of the Year, came into the top 10 rankings in ninth position, just ahead of the country's favourite SUV, the Toyota Fortuner.

Among the big losers in the quarter were the Nissan Tiida (sales down from
2 338 to 846 due to a cut back on sales to rental companies) and Opel Astra (sales dropping from 1 099 to 590 despite an extended model line-up.

Toyota's Avanza remains the top-selling multi-purpose vehicle (MPV) on the market, although three other Toyota passenger car ranges, the Auris, Avensis and RAV4, are finding the going tough and losing out to rivals.

LIGHT COMMERCIAL VEHICLES (LCVs):

The LCV market may be shrinking somewhat, but it remains stable in terms of the top 10 pecking order. Toyota, with strong demand for its Hilux and Quantums, continues to dominate this segment, with penetration rising by 3,5 per cent to 31,5 per cent, from sales of 14 614 units in the first three months of the year.

GMSA, buoyed by strong sales in both the half-ton and one-ton pick-up segments with Opel Corsa Utility and Isuzu, strengthened its hold on runner-up position with market share increasing by 1,9 per cent to 23,8 per cent. The Corsa Utility has now been top seller in the half-ton segment for 35 consecutive months.

FMC lost 1,2 per cent in share, but is still a comfortable third on 18,4 per cent, well ahead of Nissan, which slumped by 4,9 per cent, down to 10,2 per cent. Mercedes-Benz SA was able to lift its share of the LCV market by 1,1 per cent to 5,5 per cent despite its current limited range of Triton models and the run-out Colts to hold onto fifth position,

Volkswagen with 891 LCV sales slipped slightly in share and is now in the clutches of Chinese newcomers GoNow (886 sales) and Chana (857 sales), with Fiat and Tata both losing share and filling the bottom two places in the LCV top 10.

The single model in the LCV market that is really steaming ahead is the Quantum bus and panel van, spurred on by heavy demand for the Ses'fikile taxi version. Sales for the first quarter of 2008 totalled 4 996 units - 2,5 times more than were sold in the same period a year previously - and this propelled it up the chart from eighth to fourth spot, leapfrogging the Nissan B140, Ford Ranger, Nissan Hardbody and Ford Bantam.

MEDIUM COMMERCIAL VEHICLES (MCVs) - 3 501 - 8 500kg:

The MCV market continues to grow, despite the slowdown in car and LCV sales. First quarter MCV sales of 3 682 units was 8,5 per cent up on the YTD figure for last year, with Toyota's Dyna continuing to lead the way, with 817 units sold for a 22 per cent share.

The Mercedes-Benz Sprinter, boosted by sales into the taxi industry, grew its share by 2 per cent to 19,4 per cent on the back of sales of 714 units.

Tata held onto third place despite sales of only 383 units and a massive drop of 6,9 per cent in share (down to 10,4 per cent) and it is now in a close fight with no fewer than five other makes - Nissan Diesel (319 units sold), Isuzu (312), Iveco (305), Nissan (304) and Volkswagen (247).

HEAVY COMMERCIAL VEHICLES (HCVs) - 8 501 - 16 500kg:

Sales in the HCV market grew 7,5 per cent on the back of strong demand from commerce and industry, with Toyota Trucks' Hino 500 series continuing to hold top spot with sales of 495 units for a 27,8 per cent share. Second-placed Nissan Diesel lost some ground as share slipped by 1,1 per cent to 18,4 per cent from sales of 327 units, which put it almost into the clutches of another Japanese truck maker, Isuzu, which sold 308 units for an increased share of 17,3 per cent (up 2,4 per cent).

The only other makers to sell significant volumes in this market were Tata (283 units, with share down 1,3 per cent), Mercedes-Benz (171 units sold) and Mitsubishi Fuso (143 sales).

EXTRA-HEAVY COMMERCIAL VEHICLES (XHCVs) - More than 16 501kg:

This is the real growth area in the truck market, with sales up 13,4 per cent on a YTD basis. Mercedes-Benz retained its pre-eminent position with 19,1 per cent of the market from sales of 654 units (up from 555 units sold in the first three months of 2007).

Behind the leader there was a big scrap between three well-matched rivals - Nissan Diesel (475 sales),Freightliner (455) and MAN (445) - with 11 makes fighting for the remainder of this comparatively small market.

Nissan Diesel are determined to be an even stronger challenger to the segment leader with a high profile launch of its new Quon range in March, while many of the other competitors in this market will be bringing in new or additional models as this continues to be the best growth area in the overall SA vehicle market at present.

BUSES - More than 8 501kg:

The bus market saw strong growth of 53 per cent due to a major contract for 144 buses that were delivered by MAN Truck and Bus. Add in significant sales by Mercedes-Benz (70 units) , Volkswagen (52) and Scania (49) and it was a satisfactory quarter for this "Cinderella" segment in the SA vehicle market.