Vehicle sales under pressure
Vehicle dealers are experiencing a sharp reduction in the number of vehicles sold as reduced government spending and the Credit Agreement Act take effect.
Amendments made to the Credit Agreement Act are biting hard into vehicle sales. The amendments make provision for potential owners to pay a 10% deposit and to pay off their vehicles within 54 months while getting rid of the residual value leasing arrangement where a deposit was not originally required.
Namibian Sun spoke to Indongo Toyota dealer-principal Hans-Joachim Stein and M&Z managing director Verena Gruettemeyer to find out how the amendment and slowdown in government vehicle purchases have affected them.
“There has been a clear drop in business since the introduction of the new credit rules in August 2016. This is mainly in vehicle sales, both for new and used, rather than in the after-sales area. Indongo Toyota also experienced reduced vehicle sales as a result of the cancellation of government vehicle purchases,” said Stein.
“The banks are declining many more credit applications from customers than in the past. The restrictions implemented by the [amended] act, often put a vehicle purchase out of the reach of a customer, resulting in a drop of overall vehicle sales. These new rules in certain cases put a customer out of the affordable level. The new credit rules have a stronger impact than the current interest rate. A quarter or half percent increase in interest rate does not increase the repayment significantly. Increasing quarterly vehicle price increases make vehicles more expensive throughout the year, and higher fuel prices may also have an indirect affect,” he added.
As a result, Stein said Indongo Toyota restructured. “We at Indongo Toyota Windhoek have already been proactive with cost saving measures and implemented a restructuring of our business late last year without any job losses, apart from natural attrition, with certain specific strategies for the future.”
Gruettemeyer said regarding vehicle sales: “New passenger vehicle sales have declined sharply in the second half year of 2016 by approximately 22%. Our used vehicle sales have seen a drop of about 17%. Unfortunately dealership profitability is linked to achieving factory targets. The drop in vehicle sales therefore has a negative effect on dealer pay-outs and overall profitability.”
She added: “The change in the credit act as well as inflationary increases have an enormous effect on the monthly affordability of vehicles and has put entry and mid-level vehicles out of range for the ordinary consumer. I believe that the drought and sharp decline in government spending are further contributing factors.
“With inflationary increases and a drop in revenue, cost cutting is inevitable. Sensible cost-saving measures where possible have and are being implemented. Employment cost-saving measures will only be considered once it can be established that vehicle sales continue to drop, or fail to recover over the next approximately six months,” she concluded.
CLEMENS VON ALTEN
Namibian Sun spoke to Indongo Toyota dealer-principal Hans-Joachim Stein and M&Z managing director Verena Gruettemeyer to find out how the amendment and slowdown in government vehicle purchases have affected them.
“There has been a clear drop in business since the introduction of the new credit rules in August 2016. This is mainly in vehicle sales, both for new and used, rather than in the after-sales area. Indongo Toyota also experienced reduced vehicle sales as a result of the cancellation of government vehicle purchases,” said Stein.
“The banks are declining many more credit applications from customers than in the past. The restrictions implemented by the [amended] act, often put a vehicle purchase out of the reach of a customer, resulting in a drop of overall vehicle sales. These new rules in certain cases put a customer out of the affordable level. The new credit rules have a stronger impact than the current interest rate. A quarter or half percent increase in interest rate does not increase the repayment significantly. Increasing quarterly vehicle price increases make vehicles more expensive throughout the year, and higher fuel prices may also have an indirect affect,” he added.
As a result, Stein said Indongo Toyota restructured. “We at Indongo Toyota Windhoek have already been proactive with cost saving measures and implemented a restructuring of our business late last year without any job losses, apart from natural attrition, with certain specific strategies for the future.”
Gruettemeyer said regarding vehicle sales: “New passenger vehicle sales have declined sharply in the second half year of 2016 by approximately 22%. Our used vehicle sales have seen a drop of about 17%. Unfortunately dealership profitability is linked to achieving factory targets. The drop in vehicle sales therefore has a negative effect on dealer pay-outs and overall profitability.”
She added: “The change in the credit act as well as inflationary increases have an enormous effect on the monthly affordability of vehicles and has put entry and mid-level vehicles out of range for the ordinary consumer. I believe that the drought and sharp decline in government spending are further contributing factors.
“With inflationary increases and a drop in revenue, cost cutting is inevitable. Sensible cost-saving measures where possible have and are being implemented. Employment cost-saving measures will only be considered once it can be established that vehicle sales continue to drop, or fail to recover over the next approximately six months,” she concluded.
CLEMENS VON ALTEN
Comments
Namibian Sun
No comments have been left on this article