Improving the accuracy of sales forecasts is a challenge for businesses around the world. Digital tools, such as data and analytics, have revolutionised the way that predictions are made and are being used across a wide range of industries. The automotive industry is no exception. 

The car industry is on the brink of a revolution, with autonomous or self-driving cars on their way to South African roads. This move towards digitisation and automation must be capitalised upon if South Africa is to stay ahead in the global automotive industry. By making use of data, manufacturers, suppliers and dealerships can make informed predictions about sales, ensuring that they are able to cater to consumer demand. 

As a leading manufacturer and supplier of automotive parts in South Africa, Formex encourages industry stakeholders to make use of data analytics to ensure effective supply chain management. Our components and assemblies are used on many vehicle models manufactured locally and overseas, so a stable supply chain is vital for growth and success.

What does the data say about the SA automotive industry?

After the economic downturn caused by national lockdowns, the car industry took a big knock in 2020. However, recovery is well underway and econometric evidence from data shows promising signs for the future. Statisticians have indicated that car sales have recovered since the onset of Covid-19, and are now at the same level or possibly higher than pre-pandemic levels. 

Even though 2021 started out slowly for the automotive industry, sales started to gain momentum over the following few months. In May 2021, there were over 300% more sales than in May 2020. It is predicted that this surge in May has paved the way for a robust car sales market for the remainder of the year. 

Applications for vehicle finance have also been on the increase, with recent months showing significantly higher numbers of applications than the same period in 2020. Dealerships were forced to close during the initial lockdowns in South Africa, so this massive increase in applications for new cars needs to be taken into context. Saying that, there was a staggering 782% increase in applications in April 2021 compared to the same time last year. 

How can data analytics be used to predict car sales?

Apart from looking at vehicle finance applications, there are other types of data that can be used to predict South African car sales. It is estimated that 50% of consumers spend around 10 hours doing online research before signing for a new car. This makes sense, so consumers tend to use the internet to figure out which vehicle will best meet their needs. 

This econometric data can be used to predict the accuracy of car sales and is an important tool for sales analysts. In a study on German car sales, it was found that Google-based prediction models outperformed competing models, especially for periods of longer than 12 months.  

Google Trends shows that interest in buying a new car has increased significantly over the past 18 months in South Africa, with the biggest interest coming from KwaZulu-Natal, followed by Gauteng and the Western Cape. Through an analysis of the past year and a half, interest in buying a car was at a high at the beginning of September 2021 – a peak that was 25% more than previous peaks in the 18 month period. 

Studies have shown that there is a strong correlation between actual sales and predicted sales when data trends are used. By using data, predictive analytics can accurately identify potential buyers. Algorithms take into consideration a number of factors, such as information from search engines, social media and e-commerce sites, to make predictions about the people who are likely to purchase a vehicle soon. 

Why are sales predictions important?

The automotive industry is using data analytics to maximise growth and minimise risk. Inaccurate predictions can have a serious impact on automotive brands. For example, they can lead to inventory shortages or overstocking, and not being able to satisfy consumer demand. 

The automotive industry can take advantage of available technology to gain a competitive advantage. To optimise this, forecasts need to make use of data analytic tools which collect and analyse consumer behaviour, as well as macroeconomic trends. Increased competition and changing market conditions have led to a rapidly shifting market landscape. Predictive analytics help to leverage digital tools to make accurate and effective forecasts. 

What are some factors that might impact sales predictions?

It is not possible to make predictions without considering other factors, both on a national and international level. Macroeconomics plays a big role in determining the state of a local economy. The Covid-19 pandemic is one such example where a global shutdown can impact national stakeholders. 

Supply chain efficiency enables markets to respond with flexibility to changing consumer demands. Even with the use of careful prediction, if the automotive supply chain is not working optimally, forecasts will fail to come to fruition. 

On a more microeconomic level, managerial decision-making at individual dealerships can have an impact on car sales. If seasonal trends and predictive analytics are not taken into account, dealerships can make poor decisions about what stock to bring in and promote. 

How can analytics help prepare the car market?

By using emerging trends from econometric data, the automotive industry can drive growth in sales. Data from online searches reveal a lot of information about buyers, including what kind of car they want, what vehicles are in their price range and what brands are available in a particular area.  

Pre-purchasing research is a valuable source of information for forecasters, but other sources of data, such as vehicle finance applications, can also be used to predict sales. 24/7 connectivity means that the digital economy can provide valuable information for predicting patterns in e-commerce. 

However, other factors, such as supply-chain management and national regulations, can also have an impact on the markets. A smooth-running market needs reliable and informed stakeholders to ensure that manufacturers and suppliers can cater to the needs of dealerships, who, in turn, cater to the needs of the consumer.

Formex Industries is a metal forming and assembly company that supplies a variety of complex products to the local automotive industry and the export market. The company is based in the Nelson Mandela Bay metropole, South Africa’s foremost region for automotive manufacturing and export.

Formex is a supplier with 69% black ownership, of which 37% are black women. The company is owned by Deneb Investments Limited – a subsidiary of Hosken Consolidated Investments Limited (HCI) – one of South Africa’s biggest true B-BBEE companies listed on the Johannesburg Stock Exchange (JSE).

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