Market looking up, says NADA

New vehicle sales in August 2021 point to a much more resilient market, according to the National Automobile Association (Nada).

Mark Dommisse National Chairperson NADA

“This is very promising,” says Nada chairperson Mark Dommisse. “South Africa’s network of retail motor vehicle dealers once again showed tremendous resilience in tough trading conditions in August.”

Total domestic new vehicle sales increased by 24.6% in August 2021 to 41 425 units from the 33 259 units sold in the corresponding month in 2020.

Dommisse says the retail dealer channel contributed a massive 83.6% of these sales, which is a testament to how important franchise dealers are in the South African automotive environment.

“This was an outstanding performance as the economy is still recovering from the effects of the unrest in KwaZulu-Natal and Gauteng in July, as well as the substantial disruptions at the ports as a result of the unrest, coupled to the cyber-attack on Transnet operations.

“We knew we had to deal with a loss of both business and consumer confidence as well as supply challenges, but we still managed to deliver a strong recovery over the previous month.

“Year-to-date sales are up 32.4%, which is most encouraging,” he says.

Dommisse added that other forces, which impacted new vehicle sales, were also at play.

The most important of these was supply, with the global shortage of semiconductors continuing to play havoc with production, leaving many factories idle. Dommisse says the supply problem appears to be getting progressively more serious, with manufacturers either pausing production or deleting chip-specific functionality from certain model lines.

He says delays are still being encountered in the South African market because of the unrest and port disruptions, resulting in customers having to wait for their new vehicles.

“In some cases, they are tired of waiting and are changing brands by shopping elsewhere. Unfortunately, we will be forced to face this uncertainty for a while still, and I don't think supply will stabilise for some time to come,” he says.

Nedbank’s economic research unit says new vehicles sales rebounded strongly in August as daily operations normalised following the disruptions in July.

The unit says this helped dealers and retailers clear the backlog created by the social unrest and cyberattacks at Transnet’s ports, which was assisted by the country moving to adjusted lockdown Level 3.

Nedbank added that the new vehicle market is gradually moving in the right direction.

“Although sales were 12.9% lower compared to the average of the same month between 2017 and 2019, the rate of decline moderated substantially from the 29.7% experienced in July.

“Compared to the pre-crisis August 2019, total vehicle sales were down by 8.9%, significantly better than the 28.4% drop recorded in July,” it says.

Year-to-date, total new vehicle sales are 32.4% higher than the same period a year ago, with passenger vehicle sales 31.4% higher and commercial vehicles sales up by 34.1%.

Nedbank says the upturn in the vehicle market is expected to continue in the coming months, supported by low interest rates and moderately firmer income growth.

However, it says the upside in sales of passenger vehicles, which accounts for more than 60% of total vehicle sales, will partly be contained by fragile confidence and weighed down by poor employment prospects, the slow vaccine roll-out and an uncertain economic outlook.

But Nedbank says the commercial sector is unlikely to record a significant recovery as long as fixed investment spending remains depressed and business confidence low.

Lebogang Gaoaketse, head of marketing and communication at WesBank, says consumers have been keeping their vehicles for longer and have specifically delayed purchases during the pandemic.

This will create a natural demand on the replacement cycle as consumers need to renew their ageing vehicles, probably with lower mileage, he says.

Gaoaketse added that the current performance of the market is related to supply rather than demand, which means a healthy recovery for the industry is on the cards when stability returns to global production.

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