Things are looking up, says CEOs

The vast majority of the chief executives of member companies of the automotive council, Naamsa, are extremely positive that the automotive industry’s key performance indicators will continue to improve over the next six months.

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The latest results of the Naamsa CEO Confidence Index survey for the second quarter of 2021 released by Naamsa this week revealed that 93.3% of CEOs believe that general new vehicle business conditions will improve in the next six months while 6.7% of CEOs expect conditions to deteriorate in this period.

This is a significant improvement on future confidence levels in the first quarter of 2021 when only 62% of CEOs believed general business conditions would improve in the next six months, 31% that market conditions would remain unchanged and 7% that they would deteriorate.

However, the improved confidence of CEOs in general regarding new vehicle business conditions did not translate into improved confidence in 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 second quarter, revealed that 86.7% of CEOs were anticipating an increase in new vehicle sales in the next six months and 17.6% were expecting a decline in sales in this period.

However, in the first quarter of this year, 87% of the CEOs believed that domestic new vehicle sales would increase in the next six months and 7% that sales would remain the same while only 6% believed sales would decline in this period.

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

The review said the domestic economy was reflecting a robust recovery from the COVID-19 affected -7% decline in 2020, while the global economy was also on the rebound.

However, it said the domestic automotive industry was still in recovery mode and aiming to recoup some of the 2020 losses in sales and exports volumes.

It said the cautious views expressed on the employment, investment and capacity utilisation performance indicators were indicative of the anticipated protracted return to pre-COVID-19 levels.

Commenting on business conditions and the medium-term outlook, Naamsa CEO Mikel Mabasa said the new vehicle market showed strong signs of recovery during the second quarter of 2021 compared to the severely affected COVID-19 second quarter 2020.

Mabasa said the lower level of lockdown restrictions in the country during the second quarter of 2021, with interest rates remaining at their low levels and stronger sales through the dealer channels as well as renewed activity in the car rental industry supported the new vehicle market during the quarter.

However, Mabasa said obstacles that continued to adversely impact on the industry during the second quarter remained, included the persistent electricity supply disruptions, port delays, global supply chain disruptions, increasing logistical costs and the slow roll-out of vaccines.

“Of concern was the third wave of the pandemic and the implementation of the adjusted Level 4 lockdown restrictions towards the end of the quarter, which threatened to dent business and consumer sentiment and subsequently the momentum in consumption in the country,” he said.

Mabasa added that although the new vehicle market for the first half of 2021 was 40.1% higher than in the corresponding period in 2020, it was still 11.7% below the pre-COVID-19 levels in the first six months of 2019.

This highlights that a full recovery would be protracted until around 2023, he said.

Mabasa said vehicle exports for the first half of 2021 were substantially higher than in the corresponding period in 2020, with the strong rebound in global economic activity in 2021 supporting vehicle export volumes.

The domestic automotive industry would continue to benefit from favourable conditions abroad, he said.

“In terms of a time frame for a full recovery to pre-COVID-19 vehicle record export levels, much would depend on the ongoing path and management of the global pandemic,” he added.

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