The squeeze is on for new car buyers

The economic squeeze is on for vehicle buyers in South Africa, according to the National Automobile Dealers’ Association (Nada).

Mark Dommisse National Chairperson NADA

Nada chairperson, Mark Dommisse, said this is clear from the 18% drop in the new car market in January 2021 compared to the corresponding month in 2020.

Dommisse believes car-buying consumers are delaying new passenger car purchases.

He said vehicles are still needed by businesses, which explains why the light commercial vehicle market was only 4.9% down year-on-year in January 2021, with medium truck sales unchanged and sales of heavy trucks and buses up by 6.6%.

“February is likely to be little better than January 2021 as consumers remain reticent to commit to purchasing big capital assets such as cars,” he said.

Total new vehicle retail sales in January 2021 dropped by 13.9% to 34 784 vehicles - the lowest industry total since August 2020 - from the 40 413 vehicles sold in January 2020. Dommisse says sales through the dealer channel accounted for only 82.6% of total new vehicle sales in January 2021, making it the worst month for dealers since the first lockdown in March 2020.

“The market in January was soft, with a shortage of supply of certain models across the brands.

“However, we believe that the restaurant, beach and alcohol bans have influenced the need for driving for several months now, which means the purchase decision is being delayed by many ordinary motorists,” he said.

Dommisse adds that the continued lockdowns, and the second wave of infections, have resulted in a great deal of consumer uncertainty.

This was reflected in generally disappointing sales in all sectors of the economy during the past festive season, he says.

Dommisse reckons the 11.4% of total sales and 16.1% of car sales to the rental industry, which has drastically de-fleeted since the first lockdown almost a year ago, was a bright spot in the January 2021 sales figures.

WesBank Vehicle and Asset Finance head of marketing and communication, Lebogang Gaoaketse, says the motor industry is currently possibly faring quite well considering the circumstances.

Gaoaketse reckons the impact of the COVID-19 pandemic has merely accelerated what has been happening in the broader economic environment over the past five years.

He says the 2020 new vehicle market is 38.4% short of the more than 600 000 vehicle sales achieved in 2015, which indicates the sheer pressure of the recession over the past five years.

Gaoaketse adds that the purely organic 11.4% fall-off in sales during 2016 compared to 2015 constitutes almost half the decline in sales last year owing to the pandemic.

He says January 2021 sales were in line with expectations considering the country started the sales year with a return to Level 3 lockdown.

“We expect new car sales to remain under pressure this year as a result of subdued demand from both the retail and corporate sectors, as well as government. However, the used car market will remain buoyant as consumers continue to seek to lower their vehicle-related expenses,” he says.

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