Sales grow off a low base in March

The low base in new vehicle sales established in March 2020 at the onset of the COVID-19 hard lockdown was largely responsible for the substantial 31.8% increase in new vehicle sales in March 2021 to 44 217 units from the 33 546 vehicles sold in March 2020.

Used vehicle parking lot Haidan Unsplash

Econometrix chief economist Azar Jammine said there was a dramatic decline in sales in March last year due to the onset of COVID-19 and there has now been a countervailing improvement of the same order of magnitude now.

Total sales in March 2021 were still 7.3% lower than the 47 695 new vehicle sales registered in March 2019.

“I don’t want to pour cold water on it [the improvement] but remember that it's coming off an extremely low base and the fact is that new vehicle sales still haven’t caught up to sales that prevailed prior to the COVID-19 crisis,” he said.

Jammine added that the main message from an analysis of the new vehicle sales in March 2021 is that “it's the first signal of why we will end up in having positive growth” in new vehicle sales this year.

“It’s simply because we are going to be comparing sales against the very low base a year before,” he said.

Mikel Mabasa, CEO of automotive council Naamsa, said the turnaround in the new vehicle market commenced during March 2021 compared to the corresponding month last year when the lockdown restrictions in the country resulted in the temporary suspension of vehicle production and sales towards the end of March 2020.

“The industry is expected to start recapturing lost demand on its recovery path in 2021, considering the close correlation between new vehicle sales and the country's anticipated annual GDP growth rate in excess of 3%,” he said.

However, Mabasa said structural constraints, which exist in the economy, coupled with the country’s growing national and the ongoing electricity capacity limitations that business may be faced with in the future do not bode well for a quick recovery.

Mabasa said new vehicle sales in 2021 may also be hampered by stock shortages of some models in the coming months because of 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.

An estimated 85.0% or 37 572 vehicles of the total reported industry sales in March 2021 represented dealer sales, 8.7% sales to the vehicle rental industry, 3.7% sales to government and 2,6% sales to industry corporate fleets.

Sales of new passenger cars improved by 23.4% to 27 330 units from the 22 143 new cars sold in March 2020, with the car rental industry accounting for 12.3% of these sales.

Sales of new light commercial vehicles, bakkies and mini-buses increased year-on-year by a massive 52.4% to 14 375 units in March 2021, medium commercial vehicles by 11.6% to 705 units and heavy truck and buses by 35.2% to 1 807 units.

Nedbank’s Group Economic Unit said the first sign of the gradual return to normality of economic activity is visible in the March 2021 new vehicle sales numbers, with aggregate sales exceeding 40 000 units for the first time since February 2020 and much better than in March 2020 when the country entered lockdown for the first time.

“The latest numbers suggest that vehicle sales have returned to their pre-COVID level. Although the new vehicle market will continue to benefit from attractive offers by dealerships and low interest rates, generally tough economic conditions and subdued household income growth will keep the sales below 2019 levels.

“Weak domestic investment will undermine sales of commercial vehicles. The resurgence of COVID-19 infections and the associated tightening of lockdown measures will remain the key downside risk to the gradual pick in vehicle sales and economic momentum in general.

“The gradual recovery in global demand will help to boost exports,” it said.

Export sales increased by 38.6% in March 2021 to 40 026 units from the 28 889 vehicles exported in March 2020.

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