Summit lifts S.Africa new vehicle sales in August

JOHANNESBURG, Sept 3, Lucia Mutikani writing for Reuters is reporting that South Africa's annual new vehicle sales rose modestly in August on orders from the U.N. Earth Summit and were seen supported for the rest of the year by pre-emptive buying following recent rand weakness.

The National Association of Automobile Manufacturers of South Africa (Naamsa) said on Tuesday sales rose to 30,525 vehicles from 29,777 in the same period a year ago. But on a consecutive monthly basis they were down 3.6 percent on reduced selling days.

"Continued relatively resilient market demand and special factors such as orders for the World Summit on Sustainable Development contributed to new passenger car sales," Naamsa director Nico Vermuelen said.

The remaining orders for VIP cars for the 10-day summit which is being attended by about 45,000 people were delivered in August.

In addition to pre-emptive buying, total vehicle sales, currently running at about 2.8 percent behind 2001 sales, are seen supported by the introduction of new models and improved business confidence after the surprisingly strong second-quarter economic growth.

The rand has weakened in recent weeks, halving its gains against the dollar to just over 12 percent on a host of factors ranging from Zimbabwe to problems in other emerging markets.

It's historic plunge in 2001 has resulted in new vehicle prices being increased by 17 percent in the first nine months of this year, holding back sales.

"We could see more evidence of pre-price increase buying, as the next round of increases is likely to take place on October 1," said McCarthy Motor Holdings Chairman Brand Pretorius.

Sales of medium and heavy trucks showed a mixed performance, but continued to reflect improved investment sentiment in the economy. Medium commercial vehicle sales rose to 534 units from 495 units in July, while heavy vehicle sales eased by 40 units to 602 units.

South Africa's economy expanded 3.1 percent in the second quarter of 2002 from 2.2 percent in the first three months.

"Based on these and other factors, the overall expectation is that the total new vehicle market for the calendar 2002 will show a drop of approximately four to five percent on last year," said Pretorius.

"This is based on the key assumption that we won't see a fourth rate increase this year."

The Reserve Bank's monetary policy committee (MPC) meets on September 11-12 to decide on interest rates.

The MPC meeting will be held against the backdrop of a surprise surge in July inflation figures which has increased the risk of a further tightening in monetary policy.

The central bank has raised its key repo rate by three percentage points to 12.50 percent this year in a bid to dampen inflation pressures ignited by the rand's slide in 2001.