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New Year Did Not Bring Cheer for South African Auto Industry
Apr 09, 2008

The South African automobile industry is facing tough time and the same trend will continue in coming month because of global economic slowdown and rising oil prices.

The National Association of Automobile Manufacturers of South Africa (Naamsa) reported that the sale of new vehicles declined by around 10% in the first month of 2008 as compared to the corresponding month last year, as reported by Wheel24.

Naamsa also revealed that the sale of new vehicles for January 2008 witnessed a plunge of 4,916 Units against during the corresponding month last year. The total number of passenger cars sold in January 2008 was 30,483, a decline of 14.6%, equal to 5,204 Units as compared to 35,687 Units in January 2007.

According to the officials at Naamsa, economic slowdown is severely hampering the South African automotive industry. Moreover, the Reserve Bank’s announcement of hike in interest rate by 4% in June 2006 to control the inflation is also stopping consumers from buying new vehicles. Besides, people’s domestic demand is keeping the credit demand high and pushing down the household debts and consequently, affecting the disposable income of people negatively.

Experts have also credited the rising personal debts for poor performance of the South African automotive industry. Moreover, the country is witnessing a sharp increase in the unemployment rate and fall in the earning of people and as a result, people are less inclined towards buying new cars. Another big reason for slowdown in the automotive industry is spiraling global oil prices.

Additionally, in coming months, the unstable exchange rates and vulnerable global financial markets will test the market sentiment and trading conditions of the automobile industry. Besides, growing uncertainties about the South African economic growth due to power crisis and deficit in current accounts are also the main reasons for underperformance of the industry.

As per a Research Analyst at RNCOS, “The South African automobile industry is striving hard to overcome the problems arising due to global economic slowdown and rising gasoline prices. Even banks are maintaining high interest rates. Therefore, auto dealers should device policies pertaining to loan and payment of loans so that people come forward and buy new vehicles. Moreover, auto dealers should also come up with innovative designs that generate curiosity among customers for buying.”

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