The state of the vehicle industry Standard Bank Vehicle and Asset Finance

Contents Economic Indicators Vehicle Market Trends Consumer 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.

Exchange Rate vs Inflation vs Prime Rate Source: Neal Bruton & SARB SBR expects the R/$ to remain between 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.

Historical fuel price change Source: Department of Energy There has been a 287% and 417% increase in petrol & diesel prices since Jan 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.

Credit Extended to the Private Sector 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.

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. 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.

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: 0 – 1.7 Litres Medium: 1.8 – 3.0 Litres Large: 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 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.

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.

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.

New and Pre-Owned Market Trend Source: TransUnion AIS There has been a downward shift in the New / Pre-Owned ratio from 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 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.

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