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Automobiles Sales Fell in 2007 in South Africa
Jan 28, 2008

South Africa automobile industry is facing a tough time. The sale of automobile vehicles went down significantly in the last year due to rise in fuel prices and increase in interest rates.

South Africa experienced steep decline in sale of automobiles in the year ended. The overall figure of automobile vehicles sold in 2007 was 612,707 units, which was 5.2% less than the vehicles sold in 2006, according to NAAMSA (National Association of Automobile Manufacturers of South Africa), as reported by
iAfrica.

According to the NAAMSA, the sale of LCVs (Light Commercial Vehicles) and new cars in 2007 was quite low but the sale of Heavy Commercial Vehicles (HCVs) was comparatively well.

During 2007, the decline in affordability of vehicles was due to several reasons, such as price increase of vehicles and the significant rise in prime lending rates. Besides, the home debts as percentage of disposable income touched a record value of 77.4% in 2007, which made it difficult to take credit from financial institutions. The disposable income of people was strongly influenced by increase in fuel prices and increasing costs of food and electricity.

In addition, the automobile industry was strongly influenced by a series of events during 2007, which includes implementation of the national credit legislation and the introduction of National Traffic Information System (e-NaTIS). The national credit legislation increased the interest rates and introduced tough guidelines for lending while the e-NaTIS increased the problems of vehicle registration. Apart from this, the loans for automobiles are not consumer-friendly. Financial institutions are making tight polices for lending and as a result, people are not showing interest in taking loans.

Poor commercial conditions have made it difficult for automobiles companies to earn good profits. Skyrocketing fuel prices have adversely affected the purchasing capacity of consumers and the car manufacturers are going to suffer a lot this year because of prolonged strike by the car parts manufacturing industry during September last year.

NAAMSA has predicted that the country’s automobile industry will face difficult time in 2008 because the similar conditions are likely to prevail this year as well.

According to a Research Analyst at
RNCOS, “The South African automobile industry is facing a tough time due to several reasons. To make consumers feel comfortable, the automobile manufacturers have to come forward and make their policies more flexible. Companies should come up with vehicles that are based on advanced technology and consumes less fuel to attract consumers.”

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