The National Association of Automobile Manufacturers of South Africa (Naamsa) has published its sales data for 2020, showing a steep decline in car sales in the country due to the Covid-19 pandemic.
The crippling effects of the coronavirus and subsequent lockdowns resulted in a substantial decline in new vehicle sales of 156,163 units, or 29.1%, from 536,612 units in 2019 to the 380,449 units in 2020.
“Vehicle sales are linked to the strength of the economy and the pandemic not only deepened an existing economic recession, but its severe impact resulted in that the domestic new vehicle market in 2020 dropped back to the levels of two decades ago,” Naamsa said.
The significant fall in aggregate new vehicle sales occurred despite a 300-basis point interest rate cut during the year to a near 50-year low.
South Africa entered a recession before the outbreak of Covid-19, which means middle-class disposable income was already under pressure prior to the national lockdown, the association said.
The vehicle rental industry, which is a major seasonal contributor to the new vehicle market, also effectively remained dormant due to the lockdown restrictions on business travel and tourism for most of the year.
“Current market conditions in the passenger car and light commercial vehicle markets continued to be characterised by a buying downtrend with sales of pre-owned vehicles being the most enticing option in the current economy.
“The premium car segment had continued to experience significant pressure in 2020.”
Light at the end of the tunnel
South Africa started 2021 on an adjusted level 3 lockdown to slow the spread of the pandemic as the number of Covid-19 cases soared past the one million mark.
General expectations are for South Africa’s economy to rebound sharply in 2021, from a very low base in 2020. However, tough months are still ahead before business and consumer confidence will be rebuilt, Naamsa said.
“Prospects for faster growth over the medium term are likely to be constrained by new Covid-19 waves accompanied by stricter lockdown measures, needed fiscal tightening and persistent power-supply disruptions.
“The new vehicle market is expected to still face severe challenges of slow demand, rand exchange rate volatility and negative business and consumer sentiment during the first quarter of 2021.”
Although the current low-interest rates, coupled with low inflation, could be regarded as a building block to stimulate the economy, the group noted that a vehicle remains a big-ticket purchase consideration for any budget and is consequently a key indication of market confidence.
“The focus for the industry now needs to shift to resilience, recovery, and creating strategies to deal with new business and consumer behaviour.
“The development of tested and proven vaccines and their distribution would transform things for the better, especially for the travel and leisure sector which could result in a marked recovery in the vehicle rental industry in 2021.”
Naamsa said that a sustained higher economic growth rate is essential to support higher domestic new vehicle sales volumes.
“The longer the constraints of Covid-19 continue, the greater the impact on the automotive industry and the broader economy.
“In terms of the domestic automotive industry’s recovery, much will depend on the recovery of its main trading partners and the pace at which the lockdown measures are phased out, considering that well over 60% of the country’s vehicle production is exported.”
At this stage, a year-on-year improvement of around 15% in aggregate new vehicle sales volumes is projected for 2021.