Franchise dealer numbers decline in 2020

The total number of franchised new vehicle dealerships in South Africa has declined by about 40 since April 2020 – after the COVID-19 lockdown was introduced – and January 2021, according to the National Automobile Dealers’ Association (NADA).

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Nada national director, Gary McCraw, said this decline was caused by the consolidation and closure of dealerships, resulting in more than 7 000 employees in these dealerships losing their jobs. McCraw said some smaller dealerships have been acquired by larger groups while some group dealerships have been sold to other dealership groups.

He added that NADA had about 1 344 dealership members in April 2020, which accounted for about 90% of the franchised dealers in the country.

JSE-listed Barloworld announced in January 2021 that it planned to sell a total of 38 Barloworld Automotive motor franchise dealerships in South Africa and Botswana to its equal joint venture partner, NMI Durban South Motors, as a going concern for an estimated R947.26 million.

The dealerships, which formed part of the transaction, represented leading global brands such as Audi, BMW, Ford, Toyota, Lexus, Isuzu, Mazda, Volkswagen and Mercedes-Benz. McCraw said NADA did not track investments in dealerships.

Naamsa, the automotive business council, included capital expenditure on an annual basis by independent vehicle importers at their head offices and dedicated dealerships as a new addition to its quarterly review of business conditions in the automotive industry from the fourth quarter of 2020.

It revealed that capital expenditure at the head offices and dedicated dealerships of independent vehicle importers increased from only R11.8 million in 2019 to R52.4 million in 2020. However, the cost of establishing and developing a single new urban dealership, including the cost of acquiring the land, comes to many millions of rand.

NADA chairperson Mark Dommisse noted that this high-level analysis of capital expenditure by Naamsa may not be a true reflection of the current dealer investment situation.

Naamsa CEO Mikel Mabasa said the data on capital expenditure by independent vehicle importers reflected the initial information it had gathered from the few importers, who had responded to Naamsa’s request for this information. Mabasa admitted the quality of the information Naamsa had received from independent vehicle importers had improved in 2020 compared to 2019.

This was the reason for the increase in the capital expenditure figures between 2019 and 2020 rather than an actual increase in investments in dealerships.

Mabasa said Naamsa is now accelerating the process of obtaining information from independent vehicle importers to enable it to get more data from all of the importers for the next quarterly review and to provide a much fuller picture of automotive investments in South Africa than only the seven original equipment manufacturers (OEMs).

He added that Naamsa changed its name from the National Association of Automobile Manufacturers of South Africa to an automotive business council so that it could reflect on the entire automotive sector as opposed to just one element of it.

“We decided that we needed to start collecting data from all the importers because they are also investing quite significantly in the country in terms of capital expenditure, but we are not reporting on that investment at all,” he said.

Mabasa said Naamsa is now also collecting data on employment by the independent vehicle dealerships for inclusion in its quarterly review. He said a number of people were retrenched in the vehicle retailing space, particularly in the dealership network, but Naamsa’s quarterly review did not previously reflect those numbers.

“The employment and capital expenditure data collection serve as important reference points to commence with discerning trends in the independent vehicle importers’ landscape,” he said.

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