Sales growth of 15% expected in 2021

Total new vehicle sales volumes are expected to improve by about 15% in 2021, according to vehicle industry body, Naamsa.

Michael M MABASA Naamsa

This follows the massive 29.1% year-on-year slump in sales volumes to 380 449 vehicles in 2020, which was caused by the crippling effects of the COVID-19 pandemic.

Total new vehicles sales in 2020 were 156 163 units down on the 536 612 units sold in 2019.

Naamsa CEO Mikel Mabasa said vehicle sales are linked to the strength of the economy, but the pandemic not only deepened an existing economic recession, but its severe impact resulted in the domestic new vehicle market in 2020 dropping back to the levels of two decades ago.

Download a vehicle sales infographic here.

Mabasa said current market conditions in the passenger car and light commercial vehicle markets continued to be characterised by a buying down trend, with sales of pre-owned vehicles being the most enticing option in the current economy.

The premium car segment has continued to experience significant pressure in 2020, he added. New car sales in 2020 slumped by 30.6% to 246 784 vehicles from the 355 379 units sold in 2019.

Light commercial vehicle sales in 2020 dropped by 27.6% to 110 929 units from the 153 221 units sold in 2019.

Medium commercial vehicles sales declined by 22.5% year-on-year to 6 736 units in 2020 and heavy truck and bus sales by 17.2% to 16 000 units.

Naamsa said general expectations are for South Africa’s economy to rebound sharply in 2021 from a very low base in 2020 but warned that tough months are still ahead before business and consumer confidence are rebuilt.

It said prospects for faster growth over the medium term are likely to be constrained by new COVID-19 waves accompanied by stricter lockdown measures, the need for fiscal tightening and persistent power supply disruptions.

Mabasa said the new vehicle market is expected to still face severe challenges of slow demand, rand exchange rate volatility and negative business and consumer sentiment during the first quarter of 2021.

"Although the current low interest rates, coupled with low inflation, could be regarded as a building block to stimulate the economy, a vehicle remains a big-ticket purchase consideration for any household budget and is consequently a key indication of market confidence," he said.

Mabasa said the focus for the industry now needs to shift to resilience, recovery and creating strategies to deal with new business and consumer behaviour.

“A sustained higher economic growth rate is essential to support higher domestic new vehicle sales volumes. The longer the constraints of COVID-19 continue, the greater the impact on the automotive industry and the broader economy,” he said.

Mabasa added that in terms of the domestic automotive industry’s recovery, much will depend on the recovery of its main trading partners and the pace at which the lockdown measures are phased out, considering that well over 60% of the country’s vehicle production is exported.

He said vehicle exports are expected to increase year-on-year by about 20% in 2021, resulting in a projected 18% improvement in industry vehicle production in 2021.

Total vehicle exports in 2020 slumped by 29.8% or 115 273 vehicles to 271 092 vehicles from the 387 092 vehicles exported in 2019.

Mabasa said COVID-19 impacted economic activity in every region of the world, and South African vehicle exports had subsequently been affected by the deterioration in global vehicle demand because of the impact of the pandemic.

Nedbank’s Group Economic Unit said the recovery in the new vehicle market is expected to pick up in 2021 off a low base and will be supported by low interest rates, attractive offers by retailers and the gradual recovery in global demand.

However, the bank said the pace of the recovery will be limited by the resurgence of COVID-19 infections, which has necessitated stricter lockdown measures.

"This will undermine consumer confidence and heighten concerns about future earnings, making households more cautious about buying big-ticket items such as motor vehicles. Sales of commercial vehicles will be limited by lacklustre fixed investment activity," it said.

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