US embassy cable - 04PRETORIA3905

UNCLAS PRETORIA 003905 
 
SIPDIS 
 
DEPT FOR AF/S; AF/EPS; EB/TPP/MTA/IPC SWILSON 
USDOC FOR 4510/ITA/IEP/ANESA/OA/JDIEMOND 
COMMERCE ALSO FOR HVINEYARD 
TREASURY FOR BRESNICK 
DEPT PASS USTR FOR PCOLEMAN 
 
E.O. 12958: N/A 
TAGS: ETRD, SF, AGOA, USTR 
SUBJECT: MOTOR SALES REMAINED FIRM IN JULY 
 
 
1.  Summary.  Domestic demand for automobiles in South 
Africa grew by 15% year-on-year from July 2003 to July 2004. 
July sales of 26,631 units represented a 23-year high. 
Strong consumer confidence is driving the current high sales 
environment.  The stronger rand is also increasing demand 
for U.S. goods as U.S. exports of the broad category of 
motor vehicles to South Africa increased 8.6% in the first 
half of 2004 compared to the same period in 2003. End 
summary. 
 
2. The National Association of Automobiles South Africa 
announced that total motor vehicle sales in July grew by 15% 
y/y compared to July 2003. In the first seven months of 
2004, total sales were 19% stronger compared with the same 
period last year. They expect a phenomenal year in local 
sales under the current circumstances of a competitive car 
market and robust consumer confidence. 
 
3. July sales of new passenger cars reached a 23-year high 
as sales rose to 26,631 units from 25,902 units in the 
previous month and compared with 22,986 units in the same 
period last year. Strong consumer confidence is driving the 
current high sales environment. Consumers, who have 
benefited from a number of tax cuts by government over the 
last few years, now have the disposable income to invest in 
durable items. The 5.5 percentage point cut in interest 
rates, attractive incentives and new product offerings 
heavily supports this consumer boom. 
 
4. The sale of commercial vehicles rose by 25.8% over the 
first seven months of 2004. The buoyancy in the commercial 
market reflects the rise in business activity, particularly 
fixed investment activity, as well as positive business 
sentiment. 
 
5. Economists expect motor vehicle sales to remain strong in 
the remainder of 2004 as low interest rates and good 
personal income growth stimulate demand. However, year-on- 
year comparisons should be more modest in the months ahead 
because of the high base established in the second half of 
2003. 
 
6.  According to the United States International Trade 
Commission statistics, total U.S. exports motor vehicles 
(Chapter 87 of the HTS) to South Africa grew by 8.6%, from 
$176.9 million to $192.2 million in the first half of 2004. 
From January to June 2004, 5,627 units were exported 
compared to 5,373 in the same period the previous year. 
 
7. The stronger rand has been good for U.S. auto exports but 
has hurt SA auto exports to the United States.  U.S. 
automobile imports from South Africa decreased from $353.8 
million to $321.9 million in the first half of 2004 compared 
to 2003.  Of this total, imports of passenger vehicles 
declined from $281 million to $228 million.  U.S. imports of 
motor vehicles for the transport of goods, however, 
increased from $19.7 million to  $35.6 million, as did 
imports of SA auto parts, from $42 million to $49 million. 
 
FRAZER