Tough year ahead, but better than 2020

National Automobile Dealers Association national chairman Mark Dommisse says 2021 will be considered an outstanding year if total domestic new vehicles sales hit the 450 000 unit mark.

Dealerfloor chatted to Mark Dommisse Chairperson of the National Automobile Dealers Association NADA

“That will mean we will have a very stable 37 000 to 38 000 new vehicle sales a month for the whole year, which is roughly what was achieved in the last six months. But it will be tough going and it won’t be easy to get there. I believe total sales will be somewhere between 425 000 and 450 000 new vehicles,” he said.

Dommisse anticipated the new vehicle retail industry will have “a relatively stable but stressful year” that is similar to the last few months of 2020 provided the COVID-19 infection rate remains low, the death rate declines and the lockdown restrictions remain about where they are now or better until vaccines become available.

However, Dommisse said it appeared that vaccines will be a problem and take a lot longer to become available unless the government allows the private sector to get involved, which will lead to a much quicker revival in the economy.

The National Association of Automobile Manufacturers of South Africa (Naamsa) has forecast a year-on-year improvement of about 15% in aggregate new vehicle sales volumes to 438 000 units in 2021. Total new vehicle sales dropped by 29.1% to 380 449 units in 2020 from the 536 612 units sold in 2019.

Naamsa CEO Mikel 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.

Dommisse is concerned that the full financial impact of the COVID-19 hard lockdown and other restrictions on businesses and individuals has not yet been felt, which will limit their ability to buy new vehicles.

He said interest rates this year are expected to remain where they currently are or decline "a notch" but the Budget in February 2021 is concerning because the government will not have any choice but to increase taxes.

Dommisse said there have already been some vehicle price hikes this year, adding that further increases will depend on the exchange rate of the rand and sales volumes.

“If we are only going to sell 400 000 vehicles as opposed to 560 000 vehicles in 2019, then manufacturers will price accordingly. It's not only about the rand dollar [exchange rate] but also volumes. The lack of sales volumes will actually have a price effect.

“Manufacturers don’t increase the price [because of low sales volumes] but will decrease model support. There will be less incentives unless the dealer is a bit of a volume player. We’re in for a tough year but even if total sales are about 100 000 vehicles less than in 2019, the market will still be higher year-on-year,” he said.

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