The BCI for vehicle dealerships rose by one index point to 41 on a 100-point scale.

RMB/BER attributed the below neutral confidence levels among new vehicle dealerships to long waiting times for stocks of specific makes and models while spirits were dampened by the apparent pessimistic outlook caused by interest rate hikes and the rising cost of debt.

However, Absa Vehicle & Asset Finance head of strategy and business analytics, Henry Botha, doubts that new vehicle dealers have low confidence and that they are rather merely recognising the headwinds facing them.

Botha said new vehicle dealers did not expect to still be having stock shortage discussions in the fourth quarter of 2022, which add to the pressure caused by rising interest rates and consumers finding it difficult because of a deterioration in their household finances.

However, Botha said dealers were not less positive than they were in 2019 but quite upbeat about how resilient the consumer has been and how well new vehicles sales have recovered in 2022, particularly with sales levels above the forecast of automotive business council naamsa at the end of last year.

Botha said given that South Africa was not at the centre of new vehicle sales in the world, it is not the first country to get the benefits of the normalisation of the market, such as the reduction in shipping costs from the high levels post the COVID-19 pandemic.

He said it is quite a dampener for dealers to take customer orders only to hear a week later that the vehicle will not be arriving because of an issue in the supply chain.

“That weighs quite heavily on dealers,” he said.

However, Botha said the BCI confidence level of 41 for new vehicle dealerships is “quite good” considering that the confidence level of retailers was only at 42, particularly with dealerships selling an expensive asset and retailers selling items such as bread and local produce.

Botha added that the lack of new vehicle supplies had also resulted in consumers switching to other brands when a dealership was unable to secure stock of the vehicle they wanted to purchase, particularly with more new entrants in the market.

He said Chery, which returned to the South African market only a year ago, was already selling more than 1 200 units a month while other manufacturers and distributors that have been in the market for 10 or 20 years were selling fewer than 500 units a month and struggling to get that stock because of supply chain issues.

Botha said very few new entrants into the market have launched models that cost more than R800 000.

“It’s mainly been vehicles below R600 000 – and 80% of new vehicle sales are from entry level at R160 000 up to R660 000. If you are a new entrant in that space, you are in a space where there is consumer affordability.

“Consumers can decide to replace their current vehicles sooner or downgrade from above R800 000 to R600 000 because these vehicles offer value. It’s a nice sweet spot in which to launch new vehicles, especially if they offer more value for money than the vehicles that are currently available on the market,” he said.