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New vehicle sales in lockdown

April new vehicle sales were effectively dormant as South Africa endured its first full-month of lockdown. With dealerships closed, businesses forced to work remotely and endure their own commercial challenges, and consumers stuck at home, traffic was at all-time low, never mind sales.
While little real insight can be drawn from April new vehicle sales, the market recorded a volume total of 574 units, down 98.4% according to the National Association of Automobile Manufacturers of South Africa (Naamsa). Of that, 105 units were passenger cars and 318 were light commercial vehicles, impacting the year-to-date volumes of those segments downwards to 28.1% and 38.5% respectively. The industry total is 32.1% down year-to-date.
“In this unprecedented time, the motor industry is experiencing unchartered conditions and grappling with the solutions to address it,” says Lebogang Gaoaketse, Head of Marketing and Communication at WesBank. “The global consequences of this pandemic will be immense for some time to come, from the economic impacts, to the way corporations work and the manner in which consumers behave. How the motor industry adapts now will define just how drastic the changes will be, but one of the few certainties from this crisis is that the industry will be different.”
The motor industry has been significantly impacted over the past two months. It will have learned and adapted just as the rest of the world has, and as this pandemic emerges, there is nothing to define what the right or wrong way is to deal with it. But it will be eager to return to operation, whether manufacturing or retail.
“While government’s risk-adjusted and phased approach to unlocking economic activity is broadly supported, the motor industry will be looking to start operations sooner rather than later,” says Gaoaketse. “The industry’s significant 6.9% contribution to GDP means that many jobs are potentially impacted, across manufacturing and retail, as is foreign currency revenue from exports. Mobility plays a vital role in providing the necessary stimulus to all sectors of the economy to literally get moving.”
Manufacturers will be looking for renewed consumer demand before returning to full production capacity, however. This fine balancing act will rely on dealerships resuming activity, a relatively easy adaption for them to achieve social distancing protocols on showroom floors and across the buyer journey. Consumers and businesses alike will also be faced with the practical need for vehicle maintenance and parts as well as vehicle sales.
Numerous factors exist to stimulate the slow resumption of activity. “The extremely low interest rate environment, thanks to a 2% cut over the past month will help stimulate general economic activity, not least vehicle sales,” says Gaoaketse. “Indebted consumers will also be gaining some relief as a result. Significantly lower fuel prices will also contribute to household budgets, which – in some cases – will also be benefiting from work-from-home opportunities.”
Gaoaketse doesn’t expect any form of normality to return soon. “There are simply too many unknowns, from both a pandemic and economic perspective,” says Gaoaketse. “We should expect consumers to be slow in their return to the car market as they adapt to social distancing measures and remain cautious about their own budgets given the uncertainty.”