- Vehicle sales declined by a massive 29.1% in 2020 due to the impacts of the Covid-19 pandemic, according to data from the National Association of Automobile Manufacturers of South Africa.
- The association expects the new vehicle market to continue to face slow demand, among other challenges, into 2021.
- The recovery of the automotive industry is highly dependent on what happens to its trading partners, as over 60% of the country's vehicles are exported.
The Covid-19 pandemic resulted in vehicle sales declining by nearly a third in 2020, taking the new vehicle market back to levels last seen in the 2000s, data from the National Association of Automobile Manufacturers of South Africa (Naamsa) shows.
Naamsa – whose members include original equipment manufacturers Ford, Volkswagen, Toyota, BMW and Nissan – on Thursday released new vehicle sales data for December 2020. New vehicle sales were down 10.1%, compared to December 2019. Declines were recorded across all vehicle categories. Export sales however improved by 36.3% in December 2020 compared to December 2019.
Comparing the year's overall performance, the decline of new vehicle sales of 2.8% reported in 2019 was dwarfed by the 29.1% decline recorded 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 industry continued to struggle, despite measures to buoy consumers and indebted businesses – such as the 300-basis point cut in interest rates, Naamsa noted. The industry felt the impact of financial pressures on middle income households, as well as the travel bans which hurt the car rental market. Vehicle exports for the year also took a beating, having fallen by 29.8% compared to 2019.
"Covid-19 has impacted economic activity in every region of the world and South African vehicle exports had subsequently been affected by the fall in global vehicle demand because of the impact of the pandemic," said Naamsa.
Much of the recovery in the automotive industry depends on what happens in South Africa's main trading partners regarding the phasing out of lockdown measures, as over 60% of the country's vehicle production is exported. So far countries like the UK and Germany have extended their lockdowns.
"The performance of vehicle exports remains reliant on the performance and direction of global markets and over the course of 2021 will remain linked to the duration and impact of new Covid-19 waves," Naamsa said.
In light of the general expectations that the SA economy would rebound in 2021, with the World Bank pencilling in a recovery of 3.3%, Naamsa said there are still tough months ahead to rebuild business and consumer confidence.
The new vehicle market is expected to slow demand, negative business and consumer sentiment in the firt quarter of 2021 and rand exchange rate volatility.
"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.
"The longer the constraints of Covid-19 continue, the greater the impact on the automotive industry and the broader economy," it added.
Naamsa expects a 15% recovery in new vehicle sales volumes in 2021, as well as an improvement of 20% for vehicle exports and 18% in vehicle production.