Covid-19 puts the brakes on Eastern Cape vehicle makers

SA’s automotive industry could shrink by a brutal 40% as a result of Covid-19, with dire consequences for the Eastern Cape economy, where three of the country’s seven assemblers and scores of component suppliers are located.

In addition, the retail sector is not yet functioning and dealer showrooms may reopen only early next week, bringing up to 60,000 people back into the economy, though restrictions are also likely on the number of employees allowed back.

The three Eastern Cape assemblers, Mercedes-Benz, Volkswagen and Isuzu, did not release figures on production or sales for the rest of the year, though Naamsa, the representative body for 41 automotive firms doing business in the country, said total sales in the local market could drop by 1520% this year.

“We do not anticipate any growth, either in terms of local sales or exports,” Naamsa CEO Mike Mabasa said.

“The impact will be severe on both assemblers and retailers.”

He said trade and industry minister Ebrahim Patel would probably announce by the end of this week that dealerships could open from next week.

However, industry analyst Dr Neal Bruton estimated a 40% drop in local passenger car sales compared with a year ago.

Port Elizabeth-based Bruton, who has spent a lifetime as an analyst in the industry, said: “It’s looking a little bit grim. Demand will not come back immediately.

“It’s going to be a long, hard year for the motor industry.”

Car sales dropped to almost nothing during the lockdown.

Naamsa reported 574 vehicles were sold last month, mainly light commercial vehicles.

Last year, local manufacturers produced 631,983 cars, of which 387,125 were exported.

Total automotive exports were R201.7bn, of which vehicles were valued at R148bn.

With imported units, a total of 536,611 vehicles were sold within the country, of which 355,378 were passenger cars.

Assemblers and component suppliers were allowed to restart operations under level 4 of the lockdown with stringent conditions, including having only 50% of their workforces in plants.

However, Naamsa’s Mabasa was concerned that assemblers could not stay at level 4 for too long.

“It will force companies to review their staffing capacities — they have a lot of people on the payroll but are unable to use them.”

Bruton expected total passenger vehicle sales to drop to 220,000 vehicles for the full year, compared with 355,378 last year.

But any sales projections depended on when the retail sector was allowed to operate, he cautioned.

Mabasa said losing a manufacturer “is not on the horizon”, with none of the manufacturers indicating an intention to move elsewhere.

But, “the situation is very fluid and we are monitoring it closely”, he said.

However, he confirmed that Chinese automotive group BAIC was unlikely to open its new Port Elizabeth plant as planned later this year.