South Africa was already in a recession before the Covid-19 had any significant impact on the economy, with new vehicle sales continuing to mirror the deteriorating economic outlook in the country, the National Association of Automobile Manufacturers of South Africa (Naamsa) says.
In a new report focusing on the impact of the coronavirus on South Africa’s automotive sector, Naamsa noted that the SARB’s interest rate cut by 125 basis points during the quarter aimed to support an already fragile economy and to ease the financial conditions of households and firms.
The unexpected tax relief for individual taxpayers in the Budget 2020 was also welcomed, it said.
“However, the CO2 emissions tax increase and the lowering of the threshold on passenger cars – as well as the increase in the tax on double cab bakkies – effectively meant a price increase on vehicles. This, during a sustained period of market decline.
“Smaller vehicles, comprising the major portion of sales in the domestic market and which were previously excluded, would also now attract CO2 taxes.”
Naamsa noted that businesses and consumers are currently uncertain on what the future holds through the lockdown restrictions.
This will be compounded by:
- An increasing unemployment rate;
- The negative exchange rate impact;
- The negative annualised GDP growth rate;
- The Moody’s rating downgrade;
- Sustained pressure on disposable income and debt levels.
“Only once full automotive production commences along with the re-opening of the new vehicle dealer network will the impact of Covid-19 on domestic new vehicle sales and exports become clearer.
“Naamsa expects that demand for domestic new vehicles would continue to remain under pressure over the medium-term until there is greater economic stability.”
Naamsa said that first quarter 2020 industry employment reflected a decline of 670 jobs to reach 29,996 positions at the end of March 2020.
The group noted that the average monthly industry employment number for 2019 was 30,250.
You can read the full Naamsa report below: