The recovery in the domestic automotive industry depends on the speed of the phasing out of locking measures in SA’s trading partners.
- According to the National Association of Car Manufacturers in South Africa, vehicle sales fell by 29.1% in 2020 due to the impact of the Covid-19 pandemic.
- The association expects that the new vehicle market will continue to face slow demand, among other challenges, until 2021.
- The recovery of the automotive industry largely depends on what happens to its trading partners, as over 60% of the country’s cars are exported.
The Covid-19 pandemic resulted in a reduction in vehicle sales by nearly a third in 2020, returning the new vehicle market to the level last seen in the 2000s, according to data from the National Association of Car Manufacturers of South Africa (Naams).
Naamsa – whose members are original equipment manufacturers Ford, Volkswagen, Toyota, BMW and Nissan – released on Thursday new vehicle sales data for December 2020. New vehicle sales fell 10.1% from December 2019. A drop was recorded in all vehicle categories. However, export sales improved by 36.3% in December 2020 compared to December 2019.
Comparing the overall performance in the year, the decline in sales of new vehicles of 2.8% recorded in 2019 lagged behind the 29.1% recorded in 2020.
“Vehicle sales are linked to the strength of the economy, and the pandemic has not only deepened the existing economic recession, but its strong impact has resulted in the domestic new vehicle market falling to the level of two decades ago in 2020,” Naamsa said.
The industry continued to struggle, despite measures to encourage consumers and indebted businesses – such as cutting interest rates by 300 basis points, Naams said. The industry has felt the impact of financial pressures on middle-income households, as well as travel bans that have hurt the car rental market. Vehicle exports in the year also won, falling by 29.8% compared to 2019.
“Covid-19 affected economic activity in all regions of the world, and South African vehicle exports were subsequently affected by declining global demand for vehicles due to the impact of the pandemic,” Naamsa said.
Much of the recovery in the automotive industry depends on what is happening in South Africa’s major trading partners regarding the phasing out of locking measures, as over 60% of the country’s car production is exported. So far, countries like the UK and Germany have expanded their locking.
“The performance of vehicle exports remains dependent on the performance and direction of global markets and during 2021 will remain linked to the duration and impact of the new Covid-19 waves,” Naamsa said.
In light of general expectations that the SA economy will recover in 2021, with the World Bank recovering 3.3%, Naamsa said it is still a difficult month to restore confidence in business and consumers.
The new vehicle market is expected to slow demand, negative business and consumer sentiments in the first quarter of 2021, and exchange rate instability.
“The development of tested and proven vaccines and their distribution would transform things for the better, especially for the travel and entertainment sector which could result in a significant recovery in the car rental industry in 2021,” Naamsa said.
“The more restrictions Covid-19 continues, the greater the impact on the automotive industry and the wider economy,” it adds..
Naams expects a 15% recovery in new vehicle sales in 2021, as well as a 20% improvement in vehicle exports and 18% in vehicle production.