Vehicle sector slower than five years ago

EXPORT MARKET KEY: LOW ECONOMIC GROWTH CONTINUES TO BITE

Sector aims to achieve 1% of global vehicle production by 2035 –

600 000 more than currently.

South Africa is selling fewer new vehicles than it did five years ago. A sizeable 13% less, in fact, according to the National Association of Automobile Manufacturers of South Africa (Naamsa). Total new car sales (domestic and export) have dwindled from 617 650 in 2015 to 536 626 in 2019, a drop of 81 024 units.

Over the past five years, barring 2017 when economic growth was above 1%, the country has only seen a downward trend in vehicle sales. This is mainly due to a declining local market.

Naamsa’s recently released figures for 2019 show a 2.8% drop in new car sales, on the back of a flat economy that has put pressure on consumer budgets and dampened business confidence.

Naamsa estimates that sales will improve by 2% in 2020 if the economy grows by 1% or more, boosting business and customer confidence.

The South African Reserve Bank, International Monetary Fund and National Treasury expect gross domestic product (GDP) to grow by between 1.1% and 1.4% this year. The World Bank, however, last week cut SA’s GDP growth prospects to just under 1%.

Dealers under pressure

The National Automobile Dealers’ Association (Nada) says although the automotive industry is robust, sustained negative growth will continue to have adverse effects on it for the foreseeable future. “At the current 1% or less growth, we cannot expect the new car market to grow this year.”

Nada says the fall in new car sales has placed dealerships under “immense pressure” with many now “in ICU”. “This has resulted in consolidation in the market, either by dealerships closing or dealerships embarking on a multifranchising model – both have a similar effect: reduced employment as well as less investment.”

Exports supporting numbers

Naamsa CEO Michael Mabasa says record export numbers have supported higher vehicle production volumes over recent years, despite the declining domestic market. In 2019, SA saw a 10% increase in new vehicle exports; the export market has seen consistent year-on-year growth over the same five-year period.

SA currently exports 60% of the vehicles it produces. Mabasa says going beyond the 60% level isn’t likely and, should the domestic market not start growing, vehicle production levels will start levelling out.

He says that at this stage, the industry is confident the export momentum that has been supporting vehicle production will continue over the medium term, “and with structural reforms, the SA economy will start to grow at higher levels”.

Masterplan

Government’s plan for a motor programme aimed at fuelling growth in the industry will see the SA Automotive Masterplan (Saam) come into effect in 2021 and remain in place until 2035. One target is to achieve 1% of global vehicle production by 2035. This is almost 1.4 million units a year, up from just over 600 000 currently.

Saam will replace the Automotive Production Development Programme, which came into effect in 2013 and failed to meet its target of producing one million vehicles per annum by 2020.