The forecast with regards to the South African automotive industry is somewhat bleak. The global economic recession has undoubtedly had a significant impact on the South African economy, with the automotive sector being significantly affected. All elements of the sector – be it retail, auto parts manufacture or vehicle production, have been left reeling in the wake of the most severe and unprecedented drop in auto demand within recent history. While it seems that markets are once again starting to show levels of stability, Q409 is not expected to witness any significant levels of positive growth.

Earlier indications that levels of production and sales would increase over periods in Q309 have been largely unfounded, with analysts labelling H210 as the earliest period whereby any sector recovery might indeed become evident. Economists indicate that the recession is finally grinding to a halt and that FY10 – while not witnessing the booming market levels seen in periods such as 2006 and 2007 – might bear witness to elements of market stability and increased levels of consumer confidence. From a domestic standpoint, the pessimistic results underlining H109 are set to continue in Q409.

In 2009, the report forecasts vehicle sales to fall to US$11.9bn before staging a recovery in 2010 and finally reaching a total of US$17.61bn in 2013. New vehicle sales in South Africa continue to disappoint as data from NAAMSA, reveal total vehicle sales fell by 27.4% year-on-year (y-o-y) in July. While all but one of the vehicle segments reported a double-digit decline, the worst damage was done in the truck segment where sales of medium trucks fell by 46% and heavy and extra heavy truck sales were down 45.8%. Light commercial vehicles (LCVs), including pick-ups and minibuses, fell 22.5%, while passenger vehicle sales dropped 27.6%.

The bus segment, however, achieved a record performance, with sales rising 89.2% y-o-y to 263 units. BMI believes this can be attributed to the number of bus contracts that have been awarded in the run-up to the FIFA World Cup in 2010. The South African auto industry has clearly felt the effect of the economic crisis on not only a domestic but also a global level, as vehicle exports dropped 66.7% to a record low in August. This, in turn, is impacting overall production with the average production capacity usage in the industry reaching record lows in H109. There was a sharp decline in capacity usage in all segments of the new vehicle market in Q209, owing to the drastic drop off in domestic and export demand for new vehicles. This decline has led to large-scale plant closures within the industry. General Motors South Africa (GMSA) is preparing to move local production to one factory, as its capacity utilisation plummets. GMSA produced 51,000 units in 2008 and expects to turn out 26,000 units this year – out of a total installed annual production capacity of 89,000 units. Ford Motor is also planning to trim production at its Silverton plant to 28,000 units in 2009, as compared to 55,000 units in 2008.

The FIFA World Cup in 2010 is likely to play a large part in boosting the public transport network, and major contracts for the supply of buses have already been awarded. While naming German commercial manufacturers MAN and Mercedes-Benz South Africa (MBSA) as winning bidders in May, the government also announced that it would be putting up a ZAR1.4bn (US$168.8mn) guarantee for the purchase of 570 contracted buses. Terms and conditions are still to be finalised. However, the former will supply 110 spectator buses, while the latter will be responsible for the remaining 460, these comprising 168 'semi-luxury' buses and 292 intercity buses.