The bosses are feeling strong

There has been a strong rebound in the sentiment of chief executives of member companies of automotive council, naamsa, about general, new-vehicle business conditions over the next six months.

Mike Mabasa

The latest results of the naamsa CEO Confidence Index survey for the fourth quarter of 2021 reveal that 75% of CEOs expect general new vehicle business conditions to improve over the next six months compared to only 50% who expressed similar sentiments in the third quarter.

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

Only 6% of CEOs indicated in the fourth quarter that they were expecting a deterioration in general, new-vehicle business conditions over the next six months while 19% believed conditions would remain the same in this period.

In the third quarter of last year, 17% of CEOs believed general business conditions would decline over the next six months and 33% believed they would remain the same.

However, the improved sentiment among CEOs in the fourth quarter of 2021 about general business conditions over the next six months has not translated into any significant improvement in confidence about domestic new-vehicle sales over the next six months.

The naamsa quarterly review revealed that 75% of CEOs believed domestic new-vehicle sales would improve over the next six months, which is the same percentage of CEOs who expressed an identical view in the third quarter of 2021.

Fewer CEOs indicated in the fourth quarter (6%) that they expected domestic new-vehicle sales to decline over the next six months than in the third quarter (8%).

naamsa CEO, Mikel Mabasa, says the naamsa CEOs are generally upbeat that domestic and global market conditions will support the industry’s key performance indicators over the next six months while also recognising that the pace of recovery is expected to slow down in line with the much lower economic growth expectations for South Africa in 2022.

“Despite persistent structural domestic economic challenges, ongoing COVID-19 global supply chain disruptions, a series of unprecedented domestic shocks and realities of rising costs of living in 2022, the views of the CEOs express the resilience of the industry to adapt to the constantly changing and uncertain future environment,” he says.

Commenting on business conditions and the medium-term outlook for the new vehicle manufacturing industry, Mabasa says the pace of the industry’s gradual recovery slowed down further during the fourth quarter of 2021.

Mabasa says this was linked to ongoing COVID-19-related disruptions as well as further domestic adverse events during the quarter, which negatively impacted consumer and business confidence.

“The three-week strike in the steel and engineering sector, a first interest rate increase in three years, record fuel prices, power shortages, the ongoing COVID-19 global supply chain disruptions as well as the new Omicron COVID-19 variant impeded the industry’s performance during the quarter,” he says.

However, Mabasa says the motor industry showed its renowned resilience as all the industry’s key performance indicators for the full 2021 calendar year reflect very positive outcomes compared to the COVID-19-affected 2020 performance.

“Despite the realities of rising interest rates in 2022 to curb rising inflation, forecasts that the country’s economic growth rate will decelerate substantially in 2022 compared to 2021, as well as an ongoing uncertain operating environment linked to potential further COVID-19 waves, the new vehicle market trend is expected to remain upward over the medium term,” he says.

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