South Africa’s new vehicle business market declined by 14.5% for the first seven months of the year compared with the same period last year, says Standard Bank Vehicle and Asset Finance business markets head Toni Fritz.

The used vehicle business market dropped by 21.8%.

Combined, the market was down 16.4%.

South Africa’s business vehicle market includes fleet and rental cars, light commercial vehicles, medium trucks, heavy trucks and buses.

Used vehicles make up roughly one-third of the business market.

The South African new and used business vehicle market sold 674 units a day in July 2013, compared with 656 units in July 2014.

Standard Bank finances around 30% of South Africa’s business market, says Fritz.

She says the market decline seen to date this year can be attributed to a less than buoyant macro economic environment.

South Africa’s economic growth is continuing to slow down, with Standard Bank cutting its gross domestic production growth forecast for the country from 2.1%, to 2%.

Slow economic growth, higher interest rates and rising unemployment mean the new and used business market will not see a significant improvement in the next 18 months, notes Fritz.

This said, however, she expects to see a slight improvement in the business market for the remainder of 2014, driven largely by car hire companies replacing their rental fleets, although these purchases will not be enough to ensure a positive market compared with 2013.

Other good news is that there has been a marginal uptick in business confidence since the May general election.

It is clear business is keeping an eye on the bottom line, adds Fritz, with the sale of petrol vehicles in the business market decreasing by 2.5% in July, and diesel vehicle purchases increasing by 16.4%.

“This has a lot to do with the fuel price*, with the petrol price increasing by 5.4% inland since January 2012 to July 2014, but the diesel price gaining only 0.2%.

“The diesel price has stabilised over the last two years, so businesses are switching to diesel.”

A worrying trend in the business market is the increasing number of deals structured with balloon payments for smaller companies typically buying bakkies.

Average deal size has also increased, up 4.4% in July compared with July last year, to an average of R529 000 versus R480 000 in July last year.

This is a factor of vehicle price increases seen over the last number of months, says Fritz.

*Source: Automobile Association