January 2002

SAVRALA has been in existence for almost 30 years and every year its influence expands further. This is reflected in the fact that SAVRALA’s leasing and rental members between them are currently responsible for purchasing about one third of all new vehicles sold in South Africa.

The importance of this combined buying power has been recognised by the National Association of Automobile Manufacturers of South Africa (NAAMSA) whose president, Ian Robertson says: “Clearly the vehicle leasing and rental sectors are of tremendous importance to the motor manufacturing industry.”

The growth of corporate car allowance schemes has seen many of SAVRALA’S leasing members extending their expertise to the retail market. An area in which this expertise is making itself felt is through the provision of maintenance plans for private buyers. These maintenance plans are either provided directly or through manufacturers or dealer groups.

Robertson says that the advent of these maintenance plans has removed some of the concern that customers have about owning a vehicle “because they’ve got security on running costs. Of course leasing is another option to that.” With a lease, another concern of ownership can be managed – the residual value at the end of the ownership period.

Robertson wears two caps and, in his role as managing director of BMW SA, he agrees that “through practices such as motor plan, BMW and other manufacturers are competing in some respects with the vehicle leasing and rental sectors.”

The effects of the collapse of the Rand towards the end of 2001 will be felt during this year and it has already resulted in manufacturers pushing through some stiff price increases in the first quarter of the year as well as an increase in the prime rate. The impact of these increases could lead to a declining market in 2002.

Commenting on NAAMSA’s forecast for the market in 2002 Robertson says,” the best estimates are that we will have a relatively flat market. With the depreciation of the Rand, price increases were inevitable. More than that however, I think that the slowing down of world economies and our own GDP is going to have an effect on the car market.

“What I don’t anticipate however, is that we will see a dramatic decline in vehicle sales – unless for example – interest rates get hiked to a very high level. At the moment, one needs a crystal ball to see what is happening on the financial front!”

Asked about the impact that the major increase in vehicle prices will have on local and imported models, Robertson says that he believes that it will have a negative impact on some manufacturers and models.

“Consumer choice is difficult to limit or minimise, so while we may see some shifts, overall, I don’t think that we’ll see a dramatic swing away from imports to locals, particularly as local output is also affected by the currency.”

Of particular interest to SAVRALA members and their customers is the impact of the price increases on the residual values and operating costs of vehicles. The potential decline in residual values – imported vehicles in particular – may concern some players in the leasing sector. Robertson feels this is something not to be too worried about.

“As the price of new cars goes up, so does the price of second hand vehicles.   Therefore it often doesn’t reduce your residual value, but tends to have the opposite effect.” The net result is that, while the prices of vehicles will rise, their residual values are also expected to rise, which could offset some of the impact of the price increase for SAVRALA members’ customers.

With regard to operating costs, while the capital costs of vehicle components are rising, this is being offset by the extended servicing intervals. When considering the impact of the Rand on the parts and servicing components, Robertson says, “clearly there’ll be some impact. But one thing you can say for the car industry as it moves forward is that cars are continually becoming more reliable and requiring less servicing. If only South Africa could get its fuel right, we would see service intervals double what they currently are in the diesel sector.”

Asked to comment on the motor industry as a whole, Robertson is very upbeat about the various associations committed to serving the motor industry and, in particular, their openness to discuss issues. “Whether it’s NAAMSA talking to the Retail Motor Industry forum or NAACAM on the components side, we all get together on quite a regular basis and are prepared to discuss issues of benefit to the industry and consumer.

“A hot topic at the moment is the MIDP. We are now debating 2007 to 2012 and everyone concerned is putting their issues on the table so that we ultimately go forward to government with a considered and all-encompassing proposition.

“The motor industry in South Africa has a number of challenges ahead in 2002.   But, equally, on the export front, it has got some strength and resilience. Out of that can come opportunity as well.”

SAVRALA members share this enthusiasm and look forward to working with all of their customers in managing fleets costs effectively.