The uptick in new vehicle sales since June 2020 is very encouraging, says National Automobile Dealer Association (NADA) chairperson, Mark Dommisse.
“Coming out of COVID-19, it's obviously been very difficult for dealers. We have had a very tough three months in March, April and May. However, since June we have seen some very surprising upticks that we probably didn’t expect.
“While it hasn’t been easy, dealers have in fact had surprising results and quite stable sustainable results,” he said during a recent NADA webinar.
Dommisse added that new-vehicle sales in June 2020 totalled almost 32 000 units and had increased to about 37 000 units by September 2020. “It's a very nice uptick, which is very encouraging,” he said.
Dommisse said there have been some other positive developments, including bank lending levels, which have been “quite positive”.
“We haven’t seen the dramatic declines and tightening of the belts as much as we would have expected. Obviously, it's a bit tougher but from that perspective things have been a little bit better [than expected],” he said.
Dommisse said the value of the rand against the dollar has had “a bit of a Yo-yo” but interest rates have been “a huge positive”.
“With these low interest rates, it's probably saved our bacon,” he said. “There are some really positive signs in the economy now and these are definitely flowing through to our businesses.
“While things are exceptionally tough and we are not anywhere near where we would like to be, we have had a huge opportunity to right-size our businesses, take costs out and manage with what we have, so that’s been very exciting,” he said.
FNB senior economist, Siphamandla Mkhwanazi, said industrial production is a litmus test for real economic activity and although the manufacturing statistics are still below the levels achieved in 2019, there has been a progressive improvement on a month-on-month basis.
“So, on a month-on-month basis, the data suggests that there is positive momentum, which is something to cheer [about],” he said.
Mkhwanazi said there was a very sharp decline in retail sales in April and May 2020 but since then there has been a recovery to about 95% of 2019 levels or the retail sales levels just before the implementation of the COVID-19 lockdown.
Dommisse said total industry sales so far this year are at about 265 000 units, which even if sales totalled another 40 000 units a month for the rest of the year will mean that total domestic sales will not get to 400 000 units for 2020.
“But we’re going to be closer to 36 000 units [a month] and be lucky to get to 380 000 unit sales from 536 000 unit sales in 2019,” he said.
The National Association of Automobile Manufacturers of South Africa (Naamsa) is more pessimistic than Dommisse about the outlook for total vehicle sales for 2020.
In its latest quarterly business review of the industry released last week, Naamsa forecast total sales of 372 000 units for 2020, increasing by 17% to 435 000 units in 2021.
Deloitte emerging markets and Africa MD and African automotive lead partner, Dr Martyn Davies, said there was no better proxy indicator of middle-class expenditure than an automobile.
Davies said Mkhwanazi spoke about the economy recovering but the real question is whether the economy is normalising because it is only when there is a GDP tailwind of 3%, 4% or 5% that true middle-class growth occurs.
He believes there are possibly too many players and too many model variants in the market and there will certainly be consolidation.
“At a dealer level, my simple observation is that you will start to see consolidation in the premium segment around key flagship dealerships, and secondary more marginalised dealerships will take some pain as a result.
“Maybe it is a general consolidation. It’s not good news but the purchasing of passenger cars, particularly in this country, is an instance where consumers do not behave rationally, especially in Johannesburg,” he said.
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