Covid-19’s effect on SA’s motor industry not as severe as feared, says VWSA

The effect of the Covid-19 pandemic on SA’s motor industry may not be as severe as some people fear, Volkswagen SA (VWSA) MD Thomas Schaefer said on Tuesday.

This is despite the release this week of figures showing that local new-vehicle sales in April fell by 98.4% from a year earlier, and exports by 97.3%. 

However, Schaefer said there were reasons for hope.  

Vehicle manufacturers and motor dealers returned to work on Monday and though the restart has been initially slow, it will gain pace. Schaefer said VWSA’s Uitenhage assembly plant would start building Polo and Vivo cars on Wednesday and the first completed vehicles would probably roll off production lines on Friday.

Despite losing production of about 16,000 vehicles during the national lockdown, he expected export demand — which accounts for about two-thirds of VWSA’s production — to recover strongly in the coming months. Before the lockdown, Uitenhage was operating three daily shifts and still struggling to meet demand.

The local sales picture is less clear. New-vehicle sales in April fell 98.4% from a year earlier, but with motor dealers open again, some recovery is certain. Aggregate local sales for the first four months of 2020 were 31.2% behind the same period of 2019, but Schaefer hoped the full-year deficit could be contained to about 15%.

He said: “The local market is very weak but I think [the deficit] can be brought back. We can still save this year.”

He said VWSA expected to build about 140,000 vehicles in 2020, compared to 162,000 in 2019.

Mike Mabasa, CEO of the National Association of Automobile Manufacturers of SA, also suggested things could only get better.

“The industry is under no illusion that this is going to be a very difficult year,” he said on Tuesday. “However, the cut of the interest rate by a further 100 basis points during April 2020 will not only assist indebted consumers and businesses in the short term, but also help restart industry sales once the country resumes business. The reduction in fuel prices will also contribute while the oil price remains low.”

Schaefer was speaking in Port Elizabeth at the announcement of a partnership between VWSA and the German government to build a 4,000-bed temporary hospital in that city for Covid-19 patients. He said he expected the first phase of the project, offering about 1,400 beds, to be ready “in six to seven weeks”.

Germany’s ministry for economic co-operation and development has allocated €5.2m for the project. Of this, about R82m will be used to convert a disused VWSA factory into a medical facility. The balance will buy personal protective equipment (PPE) for Eastern Cape hospitals.

Schaefer said VWSA, which is already manufacturing ventilators and face masks for the Covid-19 fight, would contribute a further R28m. The company would also be responsible for managing the conversion of the factory and the procurement of PPE for the facility’s staff and patients. The latter will include high-risk patients requiring oxygenation.

The 66,000m² factory, in the Port Elizabeth suburb of Korsten, used to manufacture components for VWSA vehicles but now lies empty.  Schaefer said  once the medical conversion is complete, the facility will be run by the Eastern Cape department of health.

The plant will act as an overflow medical centre in case provincial hospitals are overrun by Covid-19. Timing of the second and third phases of the conversion will depend on infection rates. Schaefer said: “The best-case scenario is that we won’t need this facility at all.”

However, he said a lack of suitable Covid-19 treatment facilities across the Eastern Cape outside Port Elizabeth made this unlikely. “I fear we will need [all 4,000 beds],” he said.  

Germany’s ambassador to SA, Martin Schaefer, said international co-operation was required to defeat Covid-19.

“The coronavirus does not stop at international borders,” he said. “It affects us all, across the globe. The best way to address this common challenge is by working together and acting in solidarity.”