New-vehicle sales take a hard knock from Covid-19 pandemic
Domestic new-car sales for March were down 26.8% — but the worst is yet to come
If you think new-vehicle sales were bad in March, wait until you see the numbers for April, says Cyril Zhungu, head of automotive retail finance at Standard Bank. “It could be a disaster.”
Industry figures published on Wednesday show local and export sales of new vehicles came a real cropper in March. Local sales fell by 29.7% from a year earlier, and exports by 21.5%.
At 22,200, domestic new-car sales were 26.8% below the 30,339 of March 2019. With light commercial sales down 37.1%, medium commercials 18.8%, heavy commercials 29.3%, extra-heavies 12.7% and buses 32.5%, the total market was 29.7% weaker — 33,545 compared to 47,695.
None of this was a surprise, says Zhungu, given the devastation being caused by the Covid-19 pandemic. The national lockdown may only have cost dealers three-and-a-half days of sales at the end of the month but economic and unemployment fears took their toll much earlier.
In April, vehicle sales won’t begin until at least the second half of the month. Dealers will be lucky to get in a full week of sales. If the lockdown is extended, there could be none at all.
The immediate prospect for exports is also dire. The local subsidiaries of BMW, Mercedes-Benz and Ford had already announced plans to suspend SA production before President Cyril Ramaphosa’s national lockdown announcement forced other motor companies to follow suit.
SA motor companies export more than two-thirds of their production but, given the vehicle sales freefall in markets around the world, there is almost no demand for their products right now.
In March, the SA motor industry exported 28,883 vehicles — 21.5% down on the 36,788 a year earlier. For the first quarter of 2020, numbers were down 12.8%, from 88,713 to 77,328.
Zhungu points out that the SA economy was already in a technical recession before Covid-19 hit. Now, with the Moody’s downgrade of SA to junk status, “it’s the perfect storm”, he said, adding, “I see no immediate way out of it.”
Mike Mabasa, CEO of the National Association of Automobile Manufacturers of SA (Naamsa), agreed: “The index tracking expected business conditions in six months fell in March to below the lowest reading recorded during the 2008/2009 global financial crisis and, in fact, the lowest level on record. This means that the worst is yet to come for the manufacturing sector.”
WesBank marketing head Lebogang Gaoaketse offers a glimmer of hope. “The government’s drastic cut of the interest rate by 100 basis points will not only assist indebted consumers in the short term, but also provide huge assistance to restarting industry sales once the country resumes [business]. The reduction in fuel prices will also contribute.”