Vehicle retailer confidence declines

Confidence among new vehicle traders declined to 35 on a 100-point scale in the first quarter of 2021 after surging to a two-year high of 41 in the fourth quarter of 2020, according to the results of the latest Bureau for Economic Research (BER) retail trade survey.

Car lot

The BER said difficult times continued to persist in the domestic motor trade industry amid weak economic growth, low business and consumer confidence levels, as well as a fragile labour market.

“The impact of this weak macroeconomic backdrop is certainly reflected in the fall in confidence in the first quarter,” it said.

Despite new vehicle sales volumes recovering some lost ground in the first quarter, the BER said sales remained depressed and well below the 12-year average reading for this indicator.

The improved confidence of motor dealers to 41 index points in the fourth quarter of 2020 was driven by a recovery in vehicle sales in the quarter. It followed dealer confidence edging up to 16 in the third quarter of 2020 after crashing in the second quarter of 2020 to levels last experienced during the global financial crisis because of the severe COVID-19 lockdown restrictions.

The deterioration in confidence among new-vehicle traders in the first quarter of 2021, following an improvement in the fourth quarter of 2020, is in line with the trend of the overall retail sector.

Retailer confidence declined to 37 index points in the first quarter of 2021 from 50 in the fourth quarter of 2020 and 36 in the third quarter of 2020.

This followed a slump in retailer confidence to a 29-year low of 11 in the second

quarter of 2020 during the hard COVID-19 lockdown. The BER said it is important to note the timing of the 2021 first quarter survey period, which took place from January 18 to March 1 2021.

It said most of the responses were received during the last two weeks of February 2021 and at this time it was clear that the peak of South Africa’s second wave of COVID-19 infections had passed.

The BER added that the sustained weak trend in new vehicle sales was reflected more pronouncedly in the new-vehicle sales data for February 2021, which illustrated that sales volumes remained down 13.3% year-on-year.

New vehicle sales volumes for March 2021, the month directly after the survey period, increased by 31.8% year-on-year.

However, this significant improvement was attributed by automotive council Naamsa, analysts and economists largely to the low base in new-vehicle sales established in March 2020 at the onset of the hard COVID-19 lockdown.

The BER said the outlook for the motor trade sector is slightly more encouraging than the retail sector.

It said new vehicle dealers were expecting both business conditions and sales volumes to improve notably in the second quarter of 2021.

“Much of the optimism is fuelled by the prospect of a further recovery in the domestic economy and more people returning to work, which could boost sales volumes given that interest rates remain low,” it said.

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