More job losses expected in auto retail, aftermarket sector

A total of 16 183 jobs were lost in the retail aftermarket between March 1 and September 30 this year, the peak period of the Covid-19 lockdown, according to Motor Industry Bargaining Council (MIBCO) statistics.

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However, National Automobile Dealers’ Association National Director Gary McCraw is expecting more job losses in the retail aftermarket because many businesses are still finalising consultations with staff in line with labour legislation.

“So this number is due to increase,” he said.

McCraw said statistics that are applicable only to vehicle dealerships are unfortunately not available.

He said NADA’s current members at end-September this year comprised 1 318 dealerships and confirmed that in the 12 months from July 1 2019 until June 30 2020 three dealerships which are NADA members amalgamated, 24 were sold and 54 closed.

By contrast, in the three months from July 1 to September 30 this year, six dealerships which are NADA members amalgamated, 14 were sold and 33 closed.

However, McCraw said dealerships that amalgamated, were sold or closed in the period from April 1 to September 30 can be directly attributed to the impact of the COVID-19 lockdown.

In this six month period, six dealerships which are members of NADA amalgamated, 19 were sold and 38 closed, he said.

National Automobile Dealer Association (NADA) chairman Mark Dommisse said there was much more consolidation of vehicle dealerships rather than closures.

Dommisse agreed that dealerships which closed would have been those whose sustainability was marginal before the COVID-19 lockdown was implemented and the remaining dealerships have an opportunity to increase sales and service and maintenance throughput, thereby improving their sustainability.

He also agreed that motorists might have a bit less choice in terms of where they have their car serviced or repaired and might have to travel a bit further to access these services.

But Dommisse stressed that year-to-date new vehicle sales through the dealer channel are 30% lower than last year and likely to be about 20% down for the full year.

Dommisse said the dealer network will have to find a way to make up that 20% in lost income, which has resulted in dealers reducing their payroll costs by 20% through natural attrition and retrenchments.

“The group’s have retrenched quite harshly while some of the independents have retrenched and some have worked really hard at reducing that cost. Dealerships have been trying to reduce their costs across the board,” he said.

A number of smaller entities have been on the financial edge following five years of low economic growth, and this event may be the tipping-point

Motus, the vehicle business of Imperial Holdings that was unbundled and separately listed on the JSE, is in the process of reducing the size of its workforce by about 2 000 people, largely in the company’s car retail and car rental businesses, through an early retirement and retrenchment process.

This is one of the actions taken by Motus to reduce the negative impact of the COVID-19 lockdown on the group’s operations and mitigate the business risk.

Combined Motor Holdings (CMH) was also forced to take drastic action and by June this year had already reduced its staff complement by 15% and anticipated a further 15% to 20% staff reduction in coming months.

Most of these job losses were in CMH’s car hire segment.

CMH CEO Jebb McIntosh said earlier this year that there will no doubt be many business casualties as a result of the trading disruption caused by the lockdown.

“A number of smaller entities have been on the financial edge following five years of low economic growth, and this event may be the tipping-point,” he said.

Dommisse added that all the service providers, such as number plate manufacturers and battery centres, have been squeezing margins and prices.

He said the downstream effect of this is that employment is being affected far more because of the limited sales volumes than the closure of dealerships.

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