The National Association of Automobile Manufacturers of South Africa (Naamsa) says that its data points to some recovery in new car sales, following months of economic lockdown – but it has warned that grey imports remain a concern in the market.
The latest data published by the group shows that new car sales grew by 12%, from 33,515 units in August to 37,403 units in September. While this is a positive turn, sales still remain down 23.9% from the 49,140 vehicles sold in September 2019.
“The easing of lockdown restrictions to level one during the month contributed to the uptick in business activity and new vehicle demand and drove the further improvement in business conditions in the South African manufacturing sector,” Naamsa said.
“However, business conditions remain far from normal and the new vehicle market is expected to remain under pressure in the current economic scenario.”
Naamsa said it is “deeply concerned” about the impact of grey imports in the market, which it estimates is costing the fiscus about R3.8 billion annually.
Grey imports are used vehicles intended for transhipping to neighbouring states which permit their sale. However, Naamsa estimates that about 30,000 of these cars remain in South Africa and that there are about 300,000 illegally imported cars on South Africa’s roads.
The monthly average new vehicle market for 2020 is 28,500 units.
“Without doubt, grey imports displace new car sales,” Naamsa said. “Grey imports have a negative impact on the automotive ecosystem because they rob the fiscus of the much needed tax revenue; they hurt job creation; they aid criminal activity; and undermine road safety initiatives.”
Mark Dommisse, chairperson of the National Automobile Dealers’ Association (NADA), said the association supports Naamsa’s call for tighter control on so-called grey imports.
“We need to pull together in these times as we strive to be a major contributor to the economic recovery of South Africa,” he said.
Call to cut tax
NADA believes the industry needs a stimulus package to recover from the economic impact of the Covid-19 pandemic and supports recent calls from Naamsa that the government cut taxes on new vehicles from 42% to 35-38%.
One proposed way to do this is 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,” said Dommisse. “Reducing taxes will not only provide a sales stimulus but also create more jobs and with more sales come additional revenue for the fiscus.”
Naamsa believes tax breaks combined with the record low interest rates and low inflation could “hugely benefit” and boost vehicle sales.
Lebogang Gaoaketse, head of marketing and communication at WesBank Vehicle and Asset Finance, said on Thursday (1 October) the finance group’s data shows an increase in applications compared to September 2019. as the long-road to recovery begins.
“Whether it remains pent-up demand or merely more consumer and business optimism in the market, there are reassuring levels of demand,” said Gaoaketse. “While this isn’t currently translating into sales, it bodes well for the continued recovery of the market as affordability slowly improves.”