ANALYSTS IN the motor industry are encouraged by local sales in the first month of the year. The industry sold just one per cent fewer cars in January than they did in the same month last year, but sales were nearly 40 per cent up on December. This is good news for the Eastern Cape, which supplies nearly one every two new vehicles sold in South Africa. All three Eastern Cape manufacturers were in the top five. DaimlerChrysler edged past Volkswagen to take the second position in total sales. The East London company also continued to lead the heavy truck sector. Volkswagen was third in total sales, followed by Delta in fifth position. Volkswagen of South Africa Sales and Marketing Director, Jolyon Nash says "from a seasonal demand perspective, the market in January is usually some 16 per cent larger than the market in December, so the 39 per cent increase was more than could be expected. The size of the market during the month is furthermore being affected by customers delaying both purchases and delivery of new vehicles into January to gain the advantage of the positive effect on the ultimate residual value of their vehicles," says Nash. Demand has, however, also been supported in early 2003 by an encouraging start to the year from the perspective of the economy in general. "The rand has sustained gains against all major currencies made in late 2002, supporting the prognosis that inflation has peaked and is likely to start slowing in coming months. The probability of lower rates of inflation in the near future has also been supported by the most recent data on credit demand and money supply growth with low annual rates of growth in both aggregates probably pre-empting lower rates of inflation in the near future. A stronger rand and lower rates of inflation, if sustained, will in all likelihood make way for the Reserve Bank to cut interest rates earlier than expected," he continued. Nash says the prognosis for 2003 is relatively good, given the positive economic outlook for the country. "Currently the economy is expected to maintain a rate of growth of around three per cent during 2003, with lower inflation and interest rates, and a considerable growth in real disposable income. These are all good indicators for the car market, which is likely to hold its own in the year ahead," he says.