Boston, MA -- (ReleaseWire) -- 05/01/2014 -- BMI is forecasting weak growth for the South African economy over the medium term based on a slowdown in China and ongoing retrenchment in the gold mining sector. Recent industrial unrest, which looks set to continue in 2014, coupled with poor infrastructure and faltering economic growth has contributed to our bearish outlook for the South African automotive sector. After witnessing a slow start to the year, we forecast total vehicle sales will grow a meagre 1.5% in 2014.
2014 is off to a slow start. Latest data available from February 2014 shows passenger vehicle sales declined 5.4% year-on-year (y-o-y) to 34,414. In fact the year to date total came in at 72,427, 8.1% lower that for the same period in 2013. Light commercial vehicles fared slightly better, with February sales increasing 1% yo- y to 14,879. However, year-to-date light vehicle sales declined 3%. Heavy vehicle sales displayed a similar pattern with a slower January, year to date sales totalled 703.
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Weak economic growth is likely to dampen domestic appetite for vehicles in the short-to-medium term. We are accordingly forecasting a lacklustre 1.5% y-o-y growth in vehicle sales, to 659,188 units in 2014, to be followed by an equally moderate 3% y-o-y growth in 2015. On the upside, high levels of investment spending and infrastructural development projects could bolster commercial vehicle sales. Sales of medium and heavy trucks increased 20.3% y-o-y and 53.6% y-o-y respectively during December2013, according to the National Association of Automobile Manufacturers of South Africa (NAAMSA).
Despite recent industrial unrest we are similarly more optimistic about growth in commercial vehicle production. BMI's long-held view that the local bus industry will be boosted by investment in Bus Rapid Transit (BRT) systems throughout South Africa continues to play out, with more big contracts awarded. Two latest projects will add a combined 174 buses, but more importantly, they will be assembled locally. Additionally, Chinese automaker First Automobile Works (FAW) is looking to start vehicle assembly at its truck plant in Eastern Cape in April or May 2014, FAW trucks and passenger cars Africa project leader, Cheng Zhang revealed. The plant, which is presently under construction, will have an initial production capacity of around 5,000 units a year. We also believe that light commercial vehicles (LCVs) will be bolstered by the hospitality and tourism sector, both of which are expected to burgeon over the forecast period.
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