The latest Naamsa CEO Confidence Index survey results for the third quarter of 2021 reveal that only 50% of CEOs expect general new vehicle business conditions to improve in the next six months compared to 93.3% who expressed similar sentiments in the second quarter and 62% in the first quarter of this year.

The percentage of CEOs who believe general new vehicle business conditions will deteriorate in the next six months also increased to 17% in the third quarter of 2021 from 6.7% in the second quarter and 7% in the first quarter.

In addition, the deterioration in confidence of CEOs in general new vehicle business conditions translated into increased pessimism about domestic new vehicle sales in the next six months.

The survey results, published in Naamsa's quarterly review of business conditions in the vehicle manufacturing industry for the third quarter, revealed that 75% of CEOs expected domestic new vehicle sales to increase in the next six months compared to 86.7% in the second quarter of 2021.

However, only 8% of CEOs in the third quarter survey expected domestic vehicle sales to decline, which is an improvement on the 17.6% of CEOs who, in the second quarter, were expecting a decline in sales in the next six months.

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

Naamsa CEO Mikel Mabasa says the Naamsa CEOs are cautiously optimistic that domestic market conditions will continue to support new vehicle sales, vehicle imports and vehicle production over the next six months and for the remainder of the industry’s key performance indicators to remain in gradual recovery mode.

However, Mabasa said the strong rebound in South Africa’s economic growth rate in 2021 was projected to taper off substantially in 2022 and, combined with the challenging structural economic problems in the country and the COVID-19 global supply chain disruptions, this was expected to continue well into 2022.

He added that the views expressed by the CEOs were indicative of an anticipated protracted industry return to pre-COVID-19 levels.

The quarterly review states that aggregate new vehicle sales increased by 14.7% in the third quarter of 2021 compared to the corresponding quarter in 2020 but are still 16.1% lower than the sales recorded in the third quarter of 2019.

It says the uptick in passenger car demand could be attributed to rental companies returning to the market.

Mabasa says challenging business conditions characterised the third quarter of 2021 owing to a number of adverse events that occurred, along with the prolonged duration of the third wave of COVID-19 infections in the country affecting business and consumer sentiment negatively.

“The civil unrest in Gauteng and KwaZulu-Natal, the cyber-attack on Transnet’s operations, delays in shipments with associated higher logistics costs, as well as the ongoing COVID-19 global supply chain disruptions, such as the shortage of semiconductors, all impeded the industry’s performance during the quarter.

“Encouragingly, however, was that new vehicle demand appeared to outstrip supply while renewed activity in the vehicle rental industry also supported the new vehicle market during the quarter,” he says.

Mabasa reckons new vehicle sales for the first nine months of 2021 are now 30.3% higher than for the corresponding period in 2020 but still 13.3% below the pre-COVID first nine months of 2019.

He says this highlighted that a full recovery of the new vehicle market will be protracted until around 2023.