Motor vehicle dealers well prepared for reopening of sales, repairs and services

Motor vehicle dealers in South Africa selling both new and used vehicles are well prepared for the reopening of sales following an announcement by the Minister of Trade, Industry and Competition, Ebrahim Patel. This is the confident message from Mark Dommisse, Chairman of the National Automobile Dealers Association (NADA). This organisation has more than 1,300 members and makes up 85% of all new vehicle franchise dealerships in SA.
“A limited number of personnel in the various dealerships have been preparing the facilities in terms of the stringent COVID-19 virus sanitation and safety rules since this was permitted, basically from Level 4,” explained Dommisse. “The new directive will permit the buying of new and used vehicles, trade ins and vehicle servicing. All arrangements with the dealerships, including test drives, will be by appointment,” says Dommisse.
Vehicle manufacturing, under strict limitations, has been permitted since 1 May and component and vehicle makers are ramping up production in terms of strict government regulations. Now they are able to sell these locally manufactured, as well as imported vehicles through retail channels in addition to exporting to destinations outside of South Africa.
“Dealers are a vital cog in the entire automotive ecosystem which includes interaction with a host of partners such as the finance houses and service providers including marketing support and vehicle transport companies. It is going to take some time to get all the systems and processes up and running, particularly as only 30% of employees are allowed on dealer premises from 13 to 23 May, after which the staff complement can be lifted to 60% until 6 June, when full staffing is permitted,” he added.
Initially the majority of interactions between dealer personnel and customers will be conducted digitally via the internet, eCommerce or telephone. Personal contact will be kept to a minimum and only by appointment in strict hygiene and social distancing conditions. Home delivery of vehicles with full sanitisation will be mandatory. Roadworthy assessment and testing centres will now be open to facilitate the sale of used vehicles.
The national lockdown has taken a heavy toll on all sectors of the local motor industry and saw retail vehicle sales in April plunge 98.4% compared to April 2019 with only 574 units reported as sold to the Department of Trade and Industry. The effect on built-up vehicle exports was massive too, with a fall of 97.3% and only 901 vehicles shipped. The automotive industry is not only a major contributor to the GDP – almost 7% in 2019 – but also a major taxpayer.
The majority of domestic consumption is driven by NADA and its members, so the longer the retail sector of the industry was unable to participate in the economy the more dire it made the situation.
“While we expect job losses in the sector, the effect on retail businesses would have been even more devastating if there had been a further delay in the issuing of a directive to permit trading. We are grateful that the dealers nationwide are now able to provide services to their customers and potential buyers, albeit on a limited scale at present,” concluded Dommisse.

Mobility is essential in getting the economy back to work

The National Automobile Dealers’ Association (NADA) empathises with the South African government and the enormous balancing act it must perform as it weighs up saving lives, protecting the health sector, and getting the economy back on its feet as the COVID-19 crisis develops.
“NADA applauds and agrees with the risk-adjusted and phased approach to unlocking economic activity, and in this regard, urges government to consider the retail automotive sector as a key component in getting all sectors operational,” says Mark Dommisse, National Chairperson of NADA.
“In order for the economy to function efficiently, it relies on various forms of crucial mobility services, including the repair and maintenance of private and public transport, parts availability, and new vehicle supply. The motor industry plays a critical role in getting people, products and services to market. It is therefore imperative that dealerships be among the first businesses to commence work when lockdown restrictions are eased,” adds Dommisse.
As soon as the go-ahead is given, new vehicle production facilities in South Africa will resume operations and will require channels in which to distribute the products they assemble. Limiting demand to export only is unnecessarily prejudicial to the factories – domestic consumption driven by the NADA members will surely help reduce the pain to OEMs and their factory workers. Interrupted supply into the local market will cause lost sales, which inevitably will lead to lost jobs.
Jebb McIntosh, founder of Combined Motor Holdings, now Chief Executive Officer and Director at CMH Holdings has this to say: “Automotive retail has a massive investment in stock, with interest costs growing daily, salaries being paid to staff and lease payments to landlords. Under the lockdown, these costs remain and are draining cash resources of every dealership. Every day this continues means an increase in the number of dealerships that will never open their doors again, and a greater number of retrenchments at dealerships that do open. This will only add to the growing number of jobless people begging the government for support.
“Franchised dealerships are disciplined businesses that are used to complying with protocols which are overseen by OEMs and other stakeholders. Strict safety protocols are in place and have been from day one, ensuring the safety of both staff and customers. In addition, dealerships are self-standing properties with a limited number of people visiting daily,” says McIntosh.
At present, there are approximately 1,600 franchise dealers in South Africa, employing 60,000 people directly. Taking the multiplier effect into account, this number increases to nearly one million people in the full automotive industry value chain.
The investment that these franchise dealers (groups and independents) have on the table in dealership facilities and working capital is well in excess of R40 billion – equating to a massive contribution to the fiscus. Retail operations account for 2.5% of the motor industry’s 6.9% contribution to GDP and can make a significant contribution to jump-starting the economy.
Osman Arbee, CEO of Motus notes: “We employ 15,000 people in South Africa. As a result, the safety of our people and customers will always come first. However, by returning to work on 4 May, we will be best placed to save our businesses, jobs and help government reduce the need for further support packages. The motor business can effectively apply the new hygiene standards and social distancing which will support the low transmission of spreading the Coronavirus due to the nature of the business where there are no large gatherings.
“Our high tax base is a strong contributor to the fiscus and we will help kick-start other industries, including the OEMs, parts manufacturers, vehicle asset financing, other financial services and the workshops. We also have a vital role to play in supporting the mobility needs of any other business or industry that is allowed to recommence trading. Simply put; we represent a low risk and high return opportunity,” concludes Arbee.

New vehicle sales show significant decline in January

New vehicle sales statistics for the month of January 2020 show overall sales of 39,475 units, an overall decline of 8.1% for the same month last year in January 2019. An estimated 32,050 units were sold by the dealer channel which is 81.2% of total sales in January 2020.
Unpacking passenger vehicle sales, the overall new passenger car market showed a decline of 5.1%, with the dealer channel showing some degree of resilience with a decline of 1.5%.
Overall light commercial vehicle sales fell by a whopping 16.3% over the same month of 2019, with dealer sales falling 15% – a “telling a tale” as to consumer affordability in this segment, commented Mark Dommisse, Chairperson of the National Automobile Dealers’ Association (NADA).
According to Dommisse, “We are in for an interesting ride with industry forecasts in the red for the new car market in 2020. Over the past five years, the South African franchised motor dealer environment has been under enormous pressure. The decline in sales volumes and the vehicle park has had a direct impact on employment and dealer profitability.”

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Passenger car market holds up in May

Despite a disruptive first two weeks due to the elections, the passenger car market held its own on dealer floors with a 2.6% increase year-on-year. This was mainly due to the uptick of sales in the more affordable price category of passenger cars. The light commercial vehicle market was severely under pressure with significant volume reductions seen this month of -15.1% compared with May 2018,” says Mark Dommisse.

“The economic uncertainty until the announcement of election results mid-May affected the market, which is clearly evident across the full commercial vehicle sector,” continues Dommisse.

 “With the election behind us and government’s focus on stabilising the economy, we should see more stability in the new vehicle market in the second half of the year,” concludes Dommisse.

NADA urges retailers to embrace growing presence of digital disruptors

According to Mark Dommisse, National Chairman of the National Automobile Dealers’ Association (NADA), the retail motor industry needs to embrace the ever-growing presence of digital disruptors, now more than ever.

“These disruptors are competitors to the traditional dealer model, used car supply and F&I departments,” says Dommisse. “According to recent research conducted by NADA USA, almost 100% of cars are researched and specified online and following up with the purchase and final decision in-dealer.
“In South Africa, the trend of consumers using the internet when planning a purchase or service is on the up. We see a growing number of people or businesses researching their vehicle purchase on line, only walking in to dealerships to test drive the vehicle, check on the credibility of the dealer and its facilities, and then conclude the purchase.  We encourage dealers’ to look at their current marketing plans and to evolve and align with this new generation of customer,” Dommisse continues.

“New vehicle sales have a challenging year ahead. We were privileged to attend a presentation by WesBank’s Chris de Kock, where he shared WesBank’s predictions for 2019. In summary, the predictions are:

“With a multitude of challenges facing us this year, we need to relook the way we do business. We can’t continue to offer solutions on the same basis as we’ve done before,” concludes Dommisse.