Here’s why there’s a shortage of new cars in South Africa right now

A combination of improved demand and an international shortage in parts has led to a shortage of stock of some new car models in South Africa.

This is primarily being driven by an ongoing global shortage of semi-conductors, or computer chips, which is impacting certain new models, said Mark Dommisse, chairperson of the National Automobile Dealers’ Association (Nada).

He added that the Covid-19 pandemic is still negatively impacting many of the countries that supply built-up vehicles and components to South Africa.

Major manufacturers, including Ford and General Motors, have had to halt production while awaiting new shipments of automotive-grade semiconductors from Taiwan and South Korea – chips that won’t even be manufactured for three to four months.

On Monday (6 April), US automakers warned of a potential 1.3 million shortfall in car and light-duty truck production in the US this year due to the chip shortage, Bloomberg reported.

Lebogang Gaoaketse, head of marketing and communication at WesBank Vehicle and Asset Finance, said that a shortage in new cars in South Africa could also be driven by increased consumer demand.

Naamsa and the Automotive Business Council’s figures for March 2021 recorded 44,217 new vehicle sales – a 31.8% increase in sales year-on-year.

“Reassuringly, March sales show a 18.4% increase over February this year, a number more indicative of the real strength of the market,” said Gaoaketse.

“With many of the brands indicating difficulty securing sufficient stock to meet demand, the new vehicle market seems to be well on its way to recovery.”

Passenger car sales were up 23.4% to 27,330 units year-on-year and 13.2% up on February 2021. With some renewed activity in the rental market, the consumer demand was noticeable with dealer sales in the segment up 24.2%.

Light Commercial Vehicles (LCVs) delivered a 52.4% improvement over March last year to sell 14,375 units.

The majority of activity in the segment remained on the showroom floor with dealers selling 61.1% more bakkies than they did a year ago.

“With interest rates remaining stable at their low levels, a constantly – albeit slowly – improving supply of imported vehicles, and a slightly healthier economy operating within eased levels of restrictions, we expect the market to continue recovering well,” said Gaoaketse.

“While we have seen a significant increase in the average deal size financed by WesBank, we don’t expect new vehicle prices to increase dramatically.

“This will also provide added stimulus to the market and is a positive sign of consumer sentiment and ability to participate in the new vehicle market.”

The strong March performance had an impact on year-to-date sales. First-quarter sales are just 0.9% down on the same period last year with 116,225 sales recorded during the first three months.

Positive signs ahead 

“Stronger retail sales in the South African vehicle market in March are most encouraging, and this year may be better than expected for the local motor industry,” said Dommisse.

“It is evident that the delayed replacement cycle is starting to catch up, helped by interest rates remaining low. The used vehicle market is also strong, which is good for the overall health of all sectors of the industry.

“Two months after a semi-hard lockdown, consumer confidence is improving. Potential buyers were wary in January, cautious in February and, now that the second wave has passed, and the country’s economy is stabilising, people are looking to buy new vehicles again.”

Dommisse said that the rate at which the commercial vehicle market is growing is also good news, as this signifies improvements in the general economy with the promise of an increasing number of infrastructure projects.

This project pipeline will certainly boost the all-important commercial sector of the market, he said.

“We cannot accurately compare sales in March 2021 with those in the same month last year. In March 2020 sales were heavily impacted by trepidation about impending restrictions and the Level 5 hard lockdown which was announced on 26 March.”

Read: How much it costs to fix potholes in South Africa

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Here’s why there’s a shortage of new cars in South Africa right now