CEOs upbeat about industry prospects

There is general agreement among the chief executives of member companies of automotive council Naamsa that there will be much improved business conditions over the next six months.

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This is according to the latest Naamsa CEO Confidence Index survey results in the quarterly review of business conditions in the vehicle manufacturing industry for the first quarter of 2021 released by Naamsa.

The Naamsa CEOs Confidence Index is an in-house business confidence indicator of current and future developments in the domestic automotive industry.

The review said the views of the chief executives are in line with the ongoing gradual improvement in the new vehicle market following the severe impact of COVID-19 on the industry’s key performance indicators in 2020.

“The CEOs across all vehicle manufacturing segments as well as the CEOs of the independent vehicle importers are by and large positive about a robust recovery in the domestic as well as global new vehicle market over the next six months, in line with the economic rebound in South Africa and international markets and from the very low base in 2020,” it said.

The review revealed that 87% of the CEO’s believe that domestic new vehicle sales will increase in the next six months and 7% that sales will remain the same while 6% believe sales will decline in this period.

In addition, 62% believe general business conditions will improve in the next six months, 31% that market conditions will remain the same and 7% that they will deteriorate.

This is in stark contrast to the CEO’s views about general business conditions in the first quarter of 2021 compared to the corresponding quarter in 2020, with 39% believing conditions had improved and 61% that they had deteriorated.

The review said the sentiment expressed by the Naamsa CEOs generally reflect the comparison of a first quarter 2021, in gradual recovery mode, with the pre COVID-19 first quarter of 2020.

“Although domestic automotive industry business conditions during the first quarter remain unsatisfactory compared to the corresponding quarter of 2020, some CEOs of selected brands on the OEM (original equipment manufacturer), heavy commercial vehicle and independent vehicle importers’ side reflected positive sentiment pertaining to their specific brands outperforming the current depressed market conditions,” it said.

Commenting on business conditions in the first quarter of 2021 and the medium-term outlook, Naamsa CEO Mikel Mabasa said the industry started recapturing lost demand during the quarter in its recovery path, with the turnaround in the new vehicle market in particular commencing in March 2021.

However, Mabasa said it should be noted that the current quarterly comparison relates to a quarter still in gradual recovery mode with a pre COVID-19 first quarter of 2020.

Mabasa stressed the close correlation between new vehicle sales and the country’s GDP growth rate.

He said South Africa GDP growth rate is projected to improve to more than 3% in 2021 and a healthy rebound in the new vehicle market performance is anticipated from the very low base in 2020.

However, Mabasa said structural constraints in the economy, coupled with the growing debt of the country and ongoing electricity capacity limitations, do not bode well for a quick recovery to pre-COVID-19 levels.

Mabasa warned that new vehicle sales in 2021 may also be hampered by stock shortages of some models in the coming months because of and caused by COVID-19 induced manufacturing supply chain disruptions, such as the current global shortage of semi-conductors, or computer chips, which are an important part of modern vehicles.

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