The state of the vehicle industry

Standard Bank Vehicle and Asset Finance

Contents

Economic IndicatorsEconomic Indicators

Vehicle Market TrendsVehicle Market Trends

Consumer Behaviour TrendsConsumer Behaviour Trends

Economic Indicators

GDP Rand Value and % Growth

Source: Neal Bruton & SARB

GDP growth has been relatively subdued over the last 3 years, Q1:14 GDP slowed to 1,6% y/y.GDP growth has been relatively subdued over the last 3 years, Q1:14 GDP slowed to 1,6% y/y.

Exchange Rate vs Inflation vs Prime Rate

Source: Neal Bruton & SARB

SBR expects the R/$ to remain between 10.50 and 11 in the second half of the year. SBR expects the R/$ to remain between 10.50 and 11 in the second half of the year.

CPI and PPI

Source: Neal Bruton

CPI and PPI are experiencing upwards pressure. SBR forecast CPI to average out at 5,9% for 2014.

CPI and PPI are experiencing upwards pressure. SBR forecast CPI to average out at 5,9% for 2014.

Historical fuel price change

Source: Department of Energy

There has been a 287% and 417% increase in petrol & diesel prices since Jan 2001. When comparing to Jan 2010, the prices have risen by 83% in petrol and 89% in diesel.

There has been a 287% and 417% increase in petrol & diesel prices since Jan 2001. When comparing to Jan 2010, the prices have risen by 83% in petrol and 89% in diesel.

Household Debt as % of Disposable Income of Households

Source: Neal Bruton

The average South African is still highly indebted.The average South African is still highly indebted.

Credit Extended to the Private Sector

Credit extensions are experiencing relatively flat growth over the last year.Credit extensions are experiencing relatively flat growth over the last year.

Source: Neal Bruton

Personal Savings Ratio (Personal Saving / Disposable Income)

Source: Neal Bruton

South African’s have had negative savings since 2005, this is not sustainable.South African’s have had negative savings since 2005, this is not sustainable.

Vehicle Market Trends

Make Up of the BA900 Installment Debtors and Leases

Source: SA Reserve Bank & VAF Finance

The growth in the VAF market has been driven primarily by the Individual market. Individuals contribute 71% of the total financed installment and lease book.

The growth in the VAF market has been driven primarily by the Individual market. Individuals contribute 71% of the total financed installment and lease book.

100%

71%

29%

New Passenger Car Sales Cycle

Source: Neal Bruton

2 million new cars sold Jan 2007 to July 2012

There has been a slow decline in the new car sales cycle that began in May 2013 and has continued through the first quarter of 2014, which is in line with subdued levels of economic activity during the first

quarter of 2014.

There has been a slow decline in the new car sales cycle that began in May 2013 and has continued through the first quarter of 2014, which is in line with subdued levels of economic activity during the first

quarter of 2014.

Factors That Will Impact Sales Growth

New car sales will remain under pressure in 2014 Factors that may assist growth:

– New model introductions, extended warranties and sales incentive schemes.

Factors moderating growth:– GDP growth – Disposable income– Exchange rate

Consumer Behavior Trends

Engine Size

Source: RGT Smart

Small passenger vehicles have increased in size since 2010, now comprising 67% (2013) of the total vehicles sold.

Small passenger vehicles have increased in size since 2010, now comprising 67% (2013) of the total vehicles sold.

Small: 0 – 1.7 LitresMedium: 1.8 – 3.0 LitresLarge: 3.1 – 8.0 Litres

Going Green: Fuel Type Comparison

There seem to be two approaches to going green:• Attempts to maximize performance of existing technologies through performance capabilities e.g. BMW – Efficient

Dynamics, Mercedes – Blue Efficiency, VW – Blue Motion, Citroen – Airdream.• Introduce new cutting edge technologies and alternative powered engines.

Source: RGT Smart

Although off a very small base Hybrid models had strong growth between 2010 to 2012. With 2013 experiencing negative y/y growth of -33%

Although off a very small base Hybrid models had strong growth between 2010 to 2012. With 2013 experiencing negative y/y growth of -33%

Personal Passenger Market

Source: SBVAF

The 0-300k price band still dominates, however, there is growth particularly in the 300k-500k.The 0-300k price band still dominates, however, there is growth particularly in the 300k-500k.

Business Market

Source: SBVAF

Passenger and Light Commercial vehicles represents greater than 70% of the business markets. Heavy Commercial Vehicle sales reflect increased volumes in mid year activity.

Passenger and Light Commercial vehicles represents greater than 70% of the business markets. Heavy Commercial Vehicle sales reflect increased volumes in mid year activity.

Affordability & Cash Flow Considerations – Original Term, Deposits & Residual Values

Source: VAF Standard Bank

Request for residual values have steadily increased, a drop in deposits has been experienced, whilst the term requested has also increased.

Request for residual values have steadily increased, a drop in deposits has been experienced, whilst the term requested has also increased.

New and Pre-Owned Market Trend

Source: TransUnion AIS

There has been a downward shift in the New / Pre-Owned ratio from 2012. New Agreements have grown by 19% while used has grown by 15% Q1:14 versus Q1:2013

There has been a downward shift in the New / Pre-Owned ratio from 2012. New Agreements have grown by 19% while used has grown by 15% Q1:14 versus Q1:2013

Pricing Impact in New and Pre-Owned Market

Source: TransUnion AIS

There is a widening gap between the used and new price change, with pricing in the new market remaining relatively flat over 2013 and increasing in 2014. This could see a shift towards the used market

becoming more favorable.

There is a widening gap between the used and new price change, with pricing in the new market remaining relatively flat over 2013 and increasing in 2014. This could see a shift towards the used market

becoming more favorable.

Age Demographics

Source: TransUnion AIS

62.4% of VAF deals concluded originate from the age groups 18 to 45 years old.62.4% of VAF deals concluded originate from the age groups 18 to 45 years old.

EndEnd