Car dealers encouraged by sales uptick, but travelling trends could curb future demand
JOHANNESBURG - With vehicle sales making gradual gains month-on-month, South African car dealers are feeling “cautiously optimistic” about the future and are slightly more hopeful than they were a few months back says Mark Dommisse, Chairman of the National Automobile Dealers’ Association (NADA).
November saw a total sales volume of 39 315 units, an increase of 563 units over October, albeit still 12 percent down on the same month last year, Naamsa reported earlier this week. Dealer sales, however, grew by 5 percent versus October and were only down by 3.8 percent year-on-year, according to NADA. Sales through the dealer channels accounted for 85 percent of total vehicle sales in November.
“Even though the retail sales figures remained muted in November, which once again reminded us of the challenges facing the overall automotive industry in these times, the general feeling of dealers is that they are slightly more hopeful than they were a few months ago,” Dommisse said.
“What we need to know now, is what direction the government is going to take to handle the growing number of coronavirus infections while still preserving a recovering economy.”
Dommisse added that consumers were currently feeling wary of spending on “big ticket” items such as cars and are instead holding onto their savings and disposable income for the time being. Another problem is the backlog in renewing vehicle and driver’s licences.
“The good news is that the industry has started on its long road to recovery with fairly consistent sales results over the past five months, and this is bringing a measure of stability to the market,” Dommisse said.
Commutes have changed and this will impact the market
“We also know that the pandemic has altered the way many people travel and anticipate ongoing changes in the commute between home and work into the future. This will impact on the type of vehicles they buy or whether a significant number will switch to shared transport options”.
On that note, WesBank CEO Chris de Kock says that these new working arrangements have reduced the demand for cars, and will also lead to lower annual mileages, which will increase the time between replacement cycles.
De Kock also pointed out that there has been a shift in market demand towards more affordable options:
“Consumers are clearly seeking to reduce their monthly instalment by buying a more affordable vehicle,” De Kock said.
“The evidence of this can be seen in the market growth of the new car segment offering lower priced vehicles where customers seem willing to substitute high profile brands for more practical and affordable options.”