South Africa March New Vehicle Sales Down 21.8 Percent

JOHANNESBURG, Apr 3 Reuters reported that South African new vehicles sales dropped sharply in March, hit by two interest rate rises so far this year and the impact on prices of the rand's dramatic slide in 2001, manufacturers said on Wednesday.

The National Association of Automobile Manufacturers of South Africa (NAAMSA) said industry sales fell by 21.8 percent to 27,217 units on an annual basis. They were also down from 30,248 in February.

Car manufacturers said the drop was largely expected as the interest rate hikes pushed up financing costs while the rand's slide inflated retail prices. They also noted there were fewer working days in March because of the early Easter break.

Exports, however, continued to soar as the weaker rand makes them cheaper. In February, 11,827 vehicles were exported, up from 7,595 the previous month.

The cumulative total of exports for the first two months of the year was 19,422, up 84.3 percent on the same period in 2001. South African car exports go mainly to the United States, Britain, Australia, Japan and other East Asian countries.

Naamsa reiterated in a statement its view that 2002 would be ``a year of mixed fortunes,'' with above-average price increases, a tighter monetary policy and modestly slower growth pressuring domestic sales, while exports continue to rise strongly.

South Africa's central bank has already raised interest rates twice this year to a current level of 11.50 percent in a bid to fight the inflationary impact of the rand's 37 percent depreciation against the dollar last year.

It is widely expected to jack rates up again by 100 basis points at its next monetary policy meeting in June, if not before.

CAR PRICES UP

The weaker rand has also led vehicle manufacturers to hike their prices by some 10-12 percent so far this year.

Imported components make up more than 50 percent of the production costs and about 30 percent of vehicles sold on the domestic market are imported on a fully-built basis.

The overall sales' decline in March was due to falls of more than 20 percent in new passenger car and light commercial vehicle sales. By contrast sales in the medium and heavy trucks and bus segments continued to rise.

Japanese car maker Toyota, which topped the list of individual manufacturer's car sales in South Africa with 5,201 vehicles sold in March, said the market performance was in the first quarter of 2002 was in line with expectations against a ``fragile'' economic background.

``Given the downward pressure on the economy...the market has performed much as expected, especially in the light of high vehicle price increases during this period and the continued threat of higher interest rates,'' said Toyota South Africa's Chief Operating Office Johan van Zyl in a statement.

Ford Motor also said the drop was not surprising, noting many buyers had purchased cars ahead of March to avoid the price increases.

However, Ford said it was concerned by a deepening political and economic crisis in neighbouring Zimbabwe, where President Robert Mugabe's re-election in March was widely condemned as fraudolent by the West.

``This could have a detrimental effect on investor confidence in the region,'' said Mike McKelvie, executive director for marketing and sales at Ford Motor in South Africa.