The new Level 4 regulations were released after this story was published -
Johannesburg - Engines are firing, and the gears have slowly started turning in the auto sector as several dealerships rolled up their garage doors for business last week amid a risk-adjusted level 4 lockdown in the country.
Since the start of the nationwide lockdown more than six weeks ago, showrooms have been closed with limited access to parts and service counters for essential services operators.
It’s no secret that the automotive retail market has all but stalled, putting thousands of jobs at risk.
Last month’s new vehicle sales were effectively dormant as the country endured its first full-month of lockdown. With most dealerships closed, businesses forced to work remotely and endure their own commercial challenges, and consumers stuck at home, traffic was at an all-time low, never mind vehicle sales.
According to the National Association of Automobile Manufacturers of South Africa (Naamsa), the market recorded a volume total of 574 units, down a whopping 98.4%. 105 units were passenger cars, and 318 were light commercial vehicles, impacting the year-to-date volumes of those segments downwards to 28.1% and 38.5% respectively.
The industry total is 32.1% down year-to-date.
“In this unprecedented time, the motor industry is experiencing uncharted conditions and grappling with the solutions to address it,” says Lebogang Gaoaketse, head of communication at WesBank.
“The global consequences of this pandemic will be immense for some time to come, from the economic impact to the way corporations work and the manner in which consumers behave. How the motor industry adapts now will define just how drastic the changes will be, but one of the few certainties from this crisis is that the industry will be different.”
“While government’s risk-adjusted and phased approach to unlocking economic activity is broadly supported, the motor industry will be looking to accelerate operations sooner rather than later,” says Gaoaketse.
“The industry’s significant 6.9% contribution to GDP means that many jobs are potentially impacted, across manufacturing and retail, as is foreign currency revenue from exports. Mobility plays a vital role in providing the necessary stimulus to all sectors of the economy to literally get moving.”
Manufacturers, however, will be looking for renewed consumer demand before returning to full production capacity. This fine balancing act will rely on all dealerships resuming activity.
“The extremely low interest rate environment, thanks to a 2% cut over the past month will help stimulate general economic activity, not least vehicle sales,” says Gaoaketse.
Industry wants to move forward
Industry representatives in the form of OEMs, importers and the associations involved in the auto sector have collectively argued that automotive retailing (and related services) are an essential part of the automotive value chain, and the longer a restrictive lockdown continues, the higher the number of dealers that will need to close shop.
Mark Dommisse, chairperson of Nada (National Automobile Dealers Association), says for an economy to function efficiently, it relies on
various forms of crucial mobility services, including the repair and maintenance of private and public transport, parts availability, and, critically, new vehicle supply.
“The motor industry plays a critical role in getting people, products and services to market. It is imperative that dealerships be among the first businesses to commence work.”
What about social distancing?
It is believed that digital solutions that enable car purchases while avoiding human contact is one area that could give this market a much-needed boost. Level 4 regulations gazetted last week allow for car sales to be phased in under directions to be announced this week and we are still waiting to find out how the handover process will be affected going forward.
According to DealerSA founder David Thomas, many dealerships are in dire straits and are going to battle to stay solvent in the coming months.
Nada’s figures show that there are 1600 franchise dealers in South Africa employing 60000 people directly, and nearly 1million in the automotive value chain with the multiplier effect. Franchise dealers’ collective investment is worth more than R40billion, which accounts for 2.5% of the motor industry 6.9% contribution to gross domestic product (GDP).
People still need to sell their cars
George Mienie, chief executive at AutoTraderSA, says consumers need to sell their cars to provide for their families during lockdown: “Particularly, consumers who are cash strapped and need money to buy food for their families would need a way in which to generate cash by selling their vehicles. Car dealerships can help them.”
Research already shows that 79% of consumers have been financially negatively affected by Covid-19.
“Consumers are searching at midnight, which shows a serious potential worry about the future and having to sell their cars,” he adds.
Consumer safety at dealerships
Car dealership showrooms are not like shopping centres or restaurants, according to industry representatives. It is argued that dealership showrooms can be controlled much more effectively with strict social distancing regulations through appointment-based visits to the dealership with evidence of online application processes.
Some say that restrictions on how many consumers may visit retail showrooms at any one time will also increase safety.
It is also believed that delivering a car to the consumer rather than having the consumer visit the dealership showroom is the way to go in future.
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