Major car brand closing dealerships in South Africa

Volvo Cars South Africa (VCSA) has announced plans to conduct a “review” of its local dealership network in the country.

At the end of February, the company announced it would conduct a strategic dealer network restructuring in South Africa.

Volvo noted that the restructuring is part of its strategy to align with global trends and enhance customer experience. It focuses on electrification, digitalisation, and sustainability.

It said that the move will involve consolidating and optimising existing dealerships rather than expanding, focusing on strategically located, high-performing dealers that can offer a consistent premium experience.

The company hasn’t disclosed the finer details of the reshuffling, but the expectation is that it will include a noticeable reduction in the number of dealers.

In a statement to News24, a spokesperson for VCSA said while the plan has not been finalised, it “has been actively consulting with its independent licensed dealers.

Any dealers affected by the review will independently evaluate their operational position and commercial strategy.

No details were given about any potential job losses and how many dealerships will be impacted by the review. 

However, MSN reported that multiple sources indicated that the total will be cut from 19 to just seven new vehicle sales facilities, covering only the country’s three major metropolitan areas, including Joburg, Cape Town and Durban.

Additionally, two dealership representatives told IOL that the Volvo Cars head office had already collected vehicles from their facilities ahead of the agreed-upon closure dates, leaving them with empty showrooms.

Despite this, VCSA said it remains committed to a transparent and fair process in all its discussions with independent dealers.

The company also added that while we have plans to resize our dealer network locally, Volvo remains fully committed to the South African market.

“This commitment is evident in the continued investment in electrified mobility and the introduction of new models,” it said.

The company reaffirmed that existing warranty and service contracts will remain unaffected by the dealer restructuring and that all customers will continue to be serviced adequately.

Move criticised by major union

VCSA noted that restructuring its business is part of its goal of becoming the leader in the electric vehicle (EV) sector.

The automotive landscape is shifting globally, and South Africa is no exception. The rise of New Energy Vehicles (NEVs) is driven by several factors, including environmental concerns and the call for cleaner transportation.

Other motivating factors are fuel price volatility, stricter emission regulations, and advances in battery technology, electric motors, and charging infrastructure.

According to Naamsa data, NEV sales in 2024 showed significant growth, with a total of 15,611 units sold in the year.

This accounts for 3% of the total new vehicle market, a notable increase over the 1.47% market share of 2023.

As technology advances, charging infrastructure expands, and more affordable models are introduced, NEVs will be seen increasingly as a viable mobility option by car buyers in South Africa. 

However, regardless of the reasons, the Motor Industry Staff Association (MISA) has condemned Volvo Cars South Africa’s decision to restructure its operations in the country.

MISA CEO Martlé Keyter said VCSA failed to notify the union, representing more than 66% of its employees, of its planned restructuring in terms of section 189 of the Labour Relations Act.

“The Act clearly states that an employer must consult with the relevant union when contemplating possible dismissals as a result of restructuring,” she said.

“It is a shame that employees at Volvo Cars South Africa had to read that restructuring could impact a significant number of dealerships.”

Keyter also noted that the announcement caused panic and anxiety among MISA’s more than 700 members, who had not informed the union before the announcement.

“Our members can rest assured that the union’s legal department will ensure that Volvo Cars South Africa follows the correct process.

“The union will participate in a joint consensus-seeking process attempting to minimise the envisaged resizing of the dealer network,” Keyter said.

BusinessTech contacted Volvo Cars South Africa for an update on their restructuring plans but did not receive a response by the time of publication.