New-vehicle sales rev up but supply still constrained

New-vehicle sales, already on a sharp upward curve, will accelerate further once supply catches up with demand, says WesBank marketing head Lebogang Gaoaketse.

Latest industry figures show that 41,425 new cars and commercial vehicles were sold in August. That was 25.3% more than July’s 33,061, which was skewed by riots and cyberattacks. It was also a 24.6% improvement on the 33,259 sales of August 2020. This took the aggregate market for the first eight months of 2021 to 301,997 — 32.4% ahead of the 228,010 at the same stage in 2020.

Gaoaketse said August’s sales would have been even better but for supply constraints. Due to the long-running shortage of semiconductor microchips, thought to have cut global vehicle production by more than 6-million so far in 2021, many ordered vehicles could not be delivered.

He said the number of finance applications by WesBank customers is “equivalent to or above” pre-Covid levels, meaning pent-up demand is growing. This would eventually translate into accelerated recovery once vehicle production returns to normal levels.

Mark Dommisse, chair of the National Automobile Dealers Association (Nada), suggested that day is still some way off. Though the worst effects of July’s riots and cyberattacks, which forced some vehicle manufacturers to suspend production, and disrupted imports and exports at the country’s harbours, are over, supply problems linger.

The bigger impact is on exports. The motor industry exported 19,446 vehicles in August. While better than July’s miserable 16,252, it was 15.6% below the 23,029 of August 2020. Yet, aggregate exports so far in 2021 are 37.7% ahead of 2020’s Covid-19-ravaged figures — 216,521 against 157,286.       

In the domestic market, Dommisse said growing numbers of customers are growing tired of waiting for their vehicles and switching to other products. He said: “I don’t think supply will stabilise for some time to come.”

Nevertheless, he described August sales as “an outstanding success”. The improvement includes a welcome increase in demand from rental companies, which have slashed orders since March 2020 because of the collapse in leisure and business travel.

Automotive Business Council CEO Mikel Mabasa said this rental recovery is one of a number of reasons for market optimism in coming months. Others include low inflation and interest rates.

But he added: “Business and consumer confidence will continue to challenge the industry’s recovery over the short to medium term. Household finances, impacting consumers’ disposable income, remain under pressure.”

Dommisse also warned of the effect of fluctuating rand values. He said: “This is a volatile situation and we believe this rollercoaster ride will continue in coming months, with political uncertainty also playing a role.”​