South African car sales won't bounce back until at least October: Naamsa

By Willem van de Putte Time of article published May 21, 2020

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Johannesburg - Whichever way you look at it the motor industry is in for a torrid 2020.

Even before South Africa went into lockdown, manufacturers were already predicting a decline in annual sales as the country tried to get to grips with an already shrinking economy.

What no-one could have foreseen was the absolutely devastating effect that the Covid-19 lockdown has had, with sales down by 98.4% last month, with only 574 vehicles sold.

According to Mike Mabasa, CEO of the National Association of Automobile Manufacturers of South Africa (Naamsa), the numbers were to be expected.

"You can't have a total lockdown and expect a different number. Sales this month should be better though because at least we're trading.

"We're putting together a recovery programme to ensure that we get back on our feet as soon as possible from the situation we currently find ourselves in," he said.

"These plans are focused on both manufacturing, retail, import and export but we can't get away from the fact that this year will be a difficult one, anyone who says different is smoking something."

Even with the easing of some of the restrictions, dealers are still saying that there hasn't really been an upswing in demand.

"A lot of people are still under lockdown and are concerned that should they get onto the road there's a likelihood that they may be pulled off by the authorities and have to explain themselves.

"A lot of businesses have also suspended buying cars, not because they don't want to, primarily because they are still in lockdown, but once you've bought the car you can't register it because licensing centres are still closed," says Mabasa.

Manufacturers had already witnessed a "buying down" trend prior to lockdown and Mabasa says this trend will certainly continue, probably more so.

"Look, South Africa is currently in a recession and what you're finding is that people are extending their motorplan, far more than previously, so people are holding onto their cars longer, those that are buying are buying down or second hand, mainly because disposable income is under a lot of pressure.

"Banks are also telling us that people are defaulting on their payments and they are approving fewer buyers as people's credit worthiness is under pressure. All of this confirms that this year is going to be a very tough one."

There may be a sliver of hope though with the cutting of interest rates.

"That is a positive influence. It may allow people to at least consider buying a car because every cent is now under pressure.

"We've also approached the government to review the 3.5 percent fringe benefit tax on company cars so companies can assist people to buy company cars because that's a huge saving and in this way stimulate the demand for cars."

But it's not only car sales that are affected. South African vehicle exporters are facing the brunt of a world-wide lockdown that's compounding matters.

"The demand has slowed down exponentially across the globe. If you look at BMW, 97 percent of what they produce in Rosslyn is exported, and export orders have reduced significantly so they have to think differently in terms of moving forward," he said.

What's the thinking then about getting back on track to at least pre-Covid numbers?

"When we open our crystal ball we think it will take at least four months, probably around October or November, before we show significant numbers again.

"But, we are already projecting a 25 percent decline over last year and that's unfortunately the reality of it.'

The hits keep on coming it seems, with Mabasa predicting that the premium market is likely to be hit the hardest.
"All the big car purchases will take strain because people are going to be looking very carefully before buying a luxury car.

That's unfortunately where we are now so we'll see importers bringing in smaller cars and buyers looking at more practical smaller cars," Mabasa concluded.

Drive360

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