Forecasts for growth this year are about 7%-10% — a third of the rate experienced last year.

It is not reasonable to expect the current record growth rates to be maintained, industry players say.

They say there may be some modest price hikes, which could damp growth rates this year. After all, vehicle prices have remained virtually unchanged over the past two to three years, despite rising inflation.

Whether car makers’ modest forecasts can be trusted remains to be seen, however. The industry has gained a poor reputation for accuracy as far as forecasting sales growth is concerned.

Most car makers and commentators grossly underestimated sales growth in 2004, resulting in vehicle supply shortages.

After selling a record 482000 vehicles in 2004, the industry said growth would taper off considerably in the following year. Instead, the market grew 28,5% — about three times the projected growth rate.

Even if the industry gets it right this time, a growth rate of 7%-10% will mark a vast improvement on the several decades of stagnant sales experienced prior to 2004.

While the industry remains cautious, it is bullish over the medium term. In fact, it is already forecasting sales of about 900000 new vehicles a year by 2010.

This is almost double the number of new vehicles sold in SA in 2004 and about triple the number of new vehicles sold in 1999.

Factors supporting the positive view include continued low interest rates, enhanced vehicle affordability, the expanding black middle class and the biggest sporting event in SA’s history, the 2010 World Cup Soccer.

“SA has moved out of the boom and bust cycle and we have entered into a golden era of stability and growth,” says Brand Pretorius, chairman of vehicle retailer McCarthy.

“We have a stronger, richer economy,” he says.

Future car sales are also likely to be tied to interest rate movements. Substantial reductions in interest rates in 2003 and further cuts after that are credited as the single largest factor that drove vehicle sales to record heights last year and the year before.

The rate cuts contributed to the expansion of the black middle class, creating a substantial new car-buying segment of the population.

According to a survey by the South African Advertising Research Foundation, the black middle class has grown by 421000 adults over the past year.

Pretorius says many black newcomers to the vehicle market leapfrog the used-car market, opting for small but new cars instead. Sales to black customers accounted for a large part of the past two years’ record growth.

The substantial increase in black business is probably one of SA’s unique dynamics, prompting exceptional growth ahead of other areas of the world.

The National Automobile Manufacturers Association of SA says the country was “probably” the world’s best-performing market last year.

It certainly has boosted the fortunes of car makers operating in SA.

They are investing heavily in expanding and upgrading production facilities, and employing more people, even as manufacturing plants in other parts of the world, mainly in the US and Europe, are downsizing and cutting thousands of jobs.