How the motor industry is surviving despite Covid-19

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As South Africa’s leading automotive group with 17 500 employees, Motus is a diversified non-manufacturing automotive company. Picture: Reuters
As South Africa’s leading automotive group with 17 500 employees, Motus is a diversified non-manufacturing automotive company. Picture: Reuters

BUSINESS


South Africa’s automotive sector has been one of the worst hit by the country’s lockdown and subsequent economic restrictions.

Facing near devastation, the industry has had to make difficult decisions and rely on its agility and entrepreneurial spirit to ensure business survival, Osman Arbee, CEO of Motus, told Gordon Institute of Business Science (Gibs) interim dean Morris Mthombeni.

“Throughout the lockdown, constant communication with our staff was key, as was communications with customers,” Arbee said.

Empowering Motus’ management teams to make decisions quickly on the ground ensured the company’s success.

“Make sure you surround yourself with good entrepreneurs who are agile and happy to take risks. That is the formula for success,” he added.

About Motus

As South Africa’s leading automotive group with 17 500 employees, Motus is a diversified non-manufacturing automotive company.

The group offers a suite of five integrated services, including the import and distribution of vehicles, retail sales and repairs of vehicles, vehicle rental through Europcar and Tempest, financial services and aftermarket parts sales.

Originally part of Imperial Holdings, the logistics and motor businesses were unbundled and Motus was listed separately on the JSE in 2018.

Motus currently has 326 dealerships in South Africa, 120 in the UK and 36 in Australia. It imports the Hyundai, Kia, Mitsubishi and Renault vehicle brands.

You can always restructure assets and make them work differently for you, but it becomes very difficult when you start restructuring people because our business is about our people.
Osman Arbee, CEO of Motus

The aftermarket parts business has 587 retail stores – Midas and Alert Engine Parts – with distribution centers in South Africa, Taiwan and China.

Its financial services business segment develops and distributes innovative vehicle-related financial products and services through importers and distributors, dealers, finance houses, call centers and digital channels.

Through this business, Motus manages and administers service, maintenance and warranty plans, and develops and sells vehicle-related value-added products and services to owners of more than 750 000 vehicles.

It is also a provider of fleet management services to corporate customers.

Covid and the automotive industry

Arbee said that while 536 000 cars were sold in South Africa during the year to December 2019, the industry had anticipated a recessionary environment in 2020 even before the Covid-19 coronavirus hit.

“We were projecting 480 000 in sales for 2020, now 375 000 vehicle sales are predicted. Covid-19 has set the industry back by three years, and sales will only recover to the 500 000 units mark by 2023,” Arbee explained.

Once South Africa’s lockdown was announced at the end of March, Motus’ senior management team took a decision to focus on the business at hand, which was “plenty of cars and bank debt, but no customers.”

“The plan until lockdown was lifted was to talk to our customers and work with various motor industry bodies. Rental became a no-go, and our dealerships and financial services arms were completely shut down. The aftermarket parts business was partly operational,” he said.

The group was able to reopen its dealerships in the middle of May with a 30% staff complement, delivering 6 500 vehicles that month, and a further 10 500 vehicles in June.

It will take us longer to integrate hybrids and electrical vehicles. The technology is just too expensive for South Africa at present, but will come later.
Osman Arbee, CEO of Motus

Arbee credits his “proactive management team who kept in touch with our customers throughout the lockdown and continued to work behind the scenes, as well as the banks who continued to finance vehicles purchases and the support from the department of trade and industry.”

While the rest of the business able to operate under extremely restrained trading conditions, the rental business was decimated. Arbee anticipates that rentals may only return to some sort of normality by July or August 2021.

“When the car rental industry shut down, we were forced to re-look our business and restructure. You can always restructure assets and make them work differently for you, but it becomes very difficult when you start restructuring people because our business is about our people.”

In addition, Europcar’s rental fleet has been reduced to 13 000 from 22 000 vehicles, and will be reassessed again in early 2021.

“Business is starting to come back, but is still nowhere near where it was,” Arbee said.

Towards innovation

Innovation in the automotive sector is inevitable to reduce costs and complexity, and to ensure competitive advantage. Arbee explained: “We are still selling the same car, but our customers have changed, and we have to adapt.”

Today’s customers are younger, active on social media and are IT-savvy.

“Customers do their homework online and are shopping differently, which means salespeople have to be trained differently.”

Motus launched the website motus.cars to facilitate presales research for new and pre-owned vehicles, Arbee said. However, while the market has shifted and needs have changed, he believes “there will always be a need for dealerships and service centres, as that’s the nature of the business”.

As the global motor industry moves towards battery technology and cleaner energy, South Africa is likely to be a laggard in adopting new technology: “It will take us longer to integrate hybrids and electrical vehicles. The technology is just too expensive for South Africa at present, but will come later,” he said.


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