Dealerfloor spoke to Brandon Cohen, National Chairperson of the National Automobile Dealers’ Association (NADA) about the changing dealership landscape in South Africa.

Premium brands are struggling to keep all their dealerships viable owing to fewer customers opting for established brands. The monthly sales figures tell the story. On the other end is the rapid progress of new brands entering the market at an unprecedented rate, opening dealerships across the country.

“Customers are under incredible financial strain, which in turn affects the dealership landscape. We are seeing several luxury brands pulling back, rationalising their footprint, sticking to the big centres and more affluent areas. For the general population, it is now more a case of, ‘What can I afford and where do I get the most bang for my buck’,” Brandon tells Dealerfloor.

“The reality is that our situation in South Africa is unique as people need access to mobility. Mobility is economic freedom for many as general public transport does not always allow for that. We need to drive. We need a car. At the same time, it is also aspirational to have a vehicle. You want a car, but you also need one.

“Many people who were looking for value wouldn’t have considered Chinese cars in the past, as the first generation of these vehicles had a few issues. With the post-COVID supply chain issues, people were forced to take a look, as Chinese manufacturers faced fewer stock shortages and were able to provide mobility.

“Customers found beautiful, tech savvy, well-specced cars at excellent price points. I don't think we're ever going back. I do think if we were to grow the economy, if we were to increase jobs, we would see more luxury vehicle sales though. Until that occurs, I think we're in that middle to lower end of the market,” Brandon states.

Referring to the changes, he says dealerships are very ‘expensive animals’ and to make them viable, they have to allow for reasonable ways to save money – like multi-franchising. A route several traditional manufacturers are now considering.

It's not only Chinese manufacturers that are entering the market in large numbers, many products from India are also coming in. India’s Tata will return to the passenger market with 20 dealerships and even manufactures from Vietnam might be seen here one day.

So who will stay and who will not?

“Entering a new market, you might have the best intensions, but application is a different thing. They all try, they've all seen the success of others and think they will succeed.

“Take Korean brands such as Hyundai and Kia, which have beautifully survived, growing wonderful top 10 market shares. Having said that, some other Korean brands like SsangYong didn't fare as well. We are probably going to experience the exact same thing with Asian vehicle brands. It is natural as the market growth is not enough to cover everyone coming in.

“It’s one thing to set up a new car dealership; it’s quite another to run it. As model cycles age and there’s a delay for new models to arrive, having parts readily available becomes crucial — especially for older vehicles,” he says.

“Change is scary, but constant, and we will constantly go through that. We will always have new countries bringing in vehicles. It started with US, UK and European brands only, followed by Japanese brands, then Korean brands and now Asian brands,” Brandon says.

Dealerfloor asked him about established brands, like some well-known Japanese brands that, looking at the monthly sales figures, are struggling to move enough product to make their dealerships profitable.

“They're really struggling. We look at the numbers, and sadly they’re just not there anymore. It's sad to see, especially given the low volumes they’re selling while being powerhouses in other countries. I think we're going to see some traditional brands having to reinvent themselves bringing low-spec affordable models in. Given the challenges around affordability and increasing competition, it's going to get tougher, and we'll likely see some brands falling by the wayside.”

What about the new extra worry of tariffs on South African exports, by the USA?

Brandon says that dealers as such are not involved in the export side and have no direct relation to the ongoing issues. However, the inflationary effects on interest rates could be a spanner in the wheels of dealerships.

“The South African Reserve Bank likes to keep a certain band between our rates and the US rates, and it will in all likelihood have a knock-on effect on our rates. Higher rates could affect business negatively.

“There were a lot of questions about vehicles destined for the USA being dumped in Africa. But they can’t offload their left-hand drive products here, so I think we’re somewhat shielded from that,” he says.

And the influence on sales?

“I think we've been hit on three sides with tariffs and the global economy on one side, the likely increase in VAT on another and then the political landscape with the tensions in the Government of National Unity. So, yes it could have a negative influence on sales.”

Are you optimistic?

“We are, because we have defied all the naysayers for the last couple of downturns The first quarter of this year, our sales just went up and up on the consumer side. Looking at the LCV, MCV and HCV market, it's a slightly different picture and that is a worry, because that's the temperature of our economy.

“Some businesses will survive, some will not, but as a country and an industry, we always somehow manage to get through every crisis that comes our way. It's just the timing of how quick or long it takes. We will, likely, see a change in the dealership landscape.

Brandon says an organisation like NADA, through its associated dealerships, goes out of its way to support its members and help them maintain their ability to operate and act as a safety net for customers.

“When you invest in a dealership, that becomes your focus, your business, your life. That is your world. Whether you're part of a corporate group or an independent operator, you must make it work, because everything revolves around the success of that dealership. Recourse and certainty for customers are absolutely crucial if something goes wrong.”