Lower lockdown levels equals improved new vehicle sales. There is no rocket science needed to work out that equation but, the South African market still has a long way to go to get fully back on track.
Year-on-year results for the past three months have shifted from 29,6% in July, through 26,3% in August, to a market down 23,9% in September. According to the National Association of Automobile Manufacturers of South Africa (Naamsa), 37 403 new vehicles were sold during September, up 3 888 units from August.
“Some momentum is gathering as economic stimuli slowly return,” says Lebogang Gaoaketse, Head of Marketing and Communication at WesBank Vehicle and Asset Finance. “The month-on-month increase in sales is more reassuring in real terms than the gradual improvement in year-on-year performance over the past three months. There are clear signs of recovery, although there remains a long road to full recovery.”
As much as those nearly 4 000 additional units of volume will have been welcomed by dealers and brands, the harsh reality remains a market 11 737 units less than September last year.
“Relatively, September sales down 23,9% compare favourably to the year-to-date performance, which is now 33,4% down from the same period last year,” says Gaoaketse. “That is a very sobering 132 878 units less so far this year than pre Covid-19 levels of market activity.”
In contrast to actual sales activity, WesBank Vehicle and Asset Finance data indicates an increase in applications compared to September last year. “Whether it remains pent-up demand or merely more consumer and business optimism in the market, there are reassuring levels of demand,” says Gaoaketse.
“While this isn’t currently translating into sales, it bodes well for the continued recovery of the market as affordability slowly improves.”
WesBank Vehicle and Asset Finance has also experienced an increase in its average deal duration, indicating the knock-on effects of lockdown delaying purchase decisions, as well as the continued stress on household incomes that is translating into current market performance.
Passenger car sales took the largest knock in September and accounted for the majority of the volume decrease year-on-year. At 31,2% down compared to September last year, the 22 798 sales meant 10 322 fewer passenger cars were sold in September than a year ago.
By comparison, Light Commercial Vehicle (LCV) sales were relatively buoyant at 12 267 units, down 8,9% or 1 202 sales compared to September 2019. Both segments did, however, sell more units than in August.
“Seemingly the long road to recovery for the automotive industry has begun,” says Gaoaketse. “Stimulating conditions to accelerate the return of new vehicle sales is welcome, including aggressive marketing campaigns, but – in particular – the low interest rate environment. Just how long these conditions will remain, will play an important part in how quickly the industry recovers.”
“The ongoing albeit slow improvement in new vehicle sales in South Africa, in line with the decreasing Lockdown Levels, is welcome, but the motor industry needs significant government support to grow sales, thereby increasing the amount of taxation paid to the state,” says Mark Dommisse, Chairperson of the National Automobile Dealers’ Association.
“An estimated 33 080 units, or 88,4% of the September total represented sales through the dealer channel, compared to 30 875 units or 92% of the total in August. However, the good news is dealer sales in September were only 11,6% down on September a year ago, indicating reassuring consumer demand in a market which was down more than double that amount.
“Government spend is clearly up and supporting the market, with sales through government channels amounting to 5% of totals. The rental industry took 3,7% of the total, while 2,9% were bought by industry corporate fleets. The rental share was still low but at least it was better than the figure for August, which is important as the rental companies are a major source of vehicles for the used car market.”
Exports, which are especially important to the viability of the local industry, were far better in September than in August, when they had been 40% lower month-on-month. In September, the 28 704 vehicles exported were only 20,9% below the figure of 36 270 vehicles shipped a year ago.
“The industry is in dire need of a stimulus package to recover from the crippling effects of the COVID-19 pandemic. Here we are fully supportive of the recent appeal by the Naamsa to government to reduce taxes on new vehicles,” says Dommisse.
“Motorists are paying more than their fair share in terms of taxes, with 42% or about R189 000 of the retail price of a car costing R450 000 going to National Treasury. Naamsa wants the figure to go down to 35%-38% by removing the carbon tax paid at time of purchase and reducing the ad valorem tax, which is a value-based tax on items considered a luxury in South Africa.
“Vehicles are certainly a necessity in a country without an efficient public transport system. Reducing taxes will not only provide a sales stimulus but also create more jobs and with more sales come additional revenue for the fiscus.”
Dommisse then went on to say the Association was also in full support of Naamsa’s latest initiative to request much tighter control on so-called grey imports into South Africa. These are used vehicles intended for transhipping to neighbouring states which permit their sale, but Naamsa estimates that as many as 30 000 stay in South Africa each year, which has a significant impact on local vehicle sales.
“We need to pull together in these times as we strive to be a major contributor to the economic recovery of South Africa,” concluded Dommisse.