The motor industry expects sales of new vehicles this year to be 15% higher than in 2010 at around 570000 units, but sales growth will slow next year.
This is after sales figures for October reached 52338 units, up 18.9% from October 2010.
Despite generally tough economic conditions, new vehicle sales for the year to date were 16.5% higher than in the first 10 months of 2010.
According to the National Association of Automobile Manufacturers of South Africa, industry sales over the past months has exceeded expectations, supported by, among other things, numerous new-model introductions.
Month on month, October's sales were down from September. September's sales of 54357 units were the highest in four years, but industry experts said these high numbers resulted from seasonal factors.
According to Nedbank's group economic unit, sales were pushed up in September by the resumption of normal production after strikes in the vehicle component industries in July and August.
The bank said September sales were also boosted by the seasonal rise in demand from rental car agencies.
One of the factors boosting sales in October was the Johannesburg International Motor Show. According to Malcolm Gauld, vice-president of sales and marketing at GM, the show created a high level of interest because of the new-model activity associated with it.
Nedbank said it expected vehicle sales to moderate in the last months of the year, dragged down by seasonal factors with customers tending to postpone purchases to the new year in order to get new-year registrations.
But Johan van Zyl, president and CEO of Toyota South Africa and managing officer of Toyota Motor Corporation, said his company expected the market to stabilise at the current growth rates for the remaining two months of the year. He said financial year-end purchasing, such as from vehicle rental companies, will drive growth.
Absa Capital's economics desk projects sales of new vehicles to grow by 5% next year.
While consumers still enjoy low interest rates when buying vehicles on credit, the tougher economic conditions are changing the way they finance vehicles.
Sydney Soundy, managing executive of Absa Vehicle and Asset Finance, said a 72-month vehicle finance contract is now becoming the norm.
"In the past it used to be 60 months. This means people can afford a slightly better car over a longer period, although they pay more interest over the longer period," he said.
On the rental side, companies still struggle to reach the volumes of 2010, which featured the World Cup.
Dawn Nathan-Jones, CEO of Europcar, said 2011 has been very disappointing in terms of the inbound market, with a decline of 2.5% compared to last year.
She said that despite increases in vehicle prices the rental agencies had only seen a 1% real increase in rental fees since 2007 and this trend is not sustainable. It has prompted rental agencies to change their business models and start charging for extras such as baby seats and GPS devices.
Most inbound tourism still comes from the traditional markets like the US, UK and Germany, but Nathan-Jones said the balance is changing thanks to the efforts of South African Tourism.
She was cautiously optimistic about the prospects for the next 18 months, given the volatility of the inbound market and global economic events.