Vehicle makers face steep climb as sales splutter
The last two major vehicle manufacturers halted by the national Covid-19 lockdown returned to work on Monday as new-vehicle sales figures showed the scale of the challenge facing the motor industry.
Ford Southern Africa and Nissan SA both reopened their Tshwane assembly plants for the first time since March. Some competitors that resumed early in May are already approaching full production but both latecomers say they will adopt a cautious, “staggered” approach.
Ford operations head Ockert Berry said on Monday the components supply chain must be fully operational and the workforce familiar with new assembly-line health precautions before the plant gets up to speed.
Nissan Africa MD Shinkichi Izumi said production at his company’s Rosslyn plant would probably start next week and reach capacity only in July.
It is not clear yet, however, what most companies mean by “capacity . The most optimistic forecasts” suggest local newvehicle sales for 2020 will fall 25% from 2019.
Toyota SA CEO Andrew Kirby and Isuzu SA MD Michael Sacke are among a group who say the drop could reach 30%.
The deficit so far this year is 38.2%. Sales figures released on Monday show that by the end of May, the industry had sold 130,762 new vehicles, compared with 211,671 in the corresponding 2019 period.
For May alone, the market was 68% worse off than a year earlier — down from 40,428 to 12,932. In its own way, however, that was something of a relief, after April’s 98.4% year-on-year collapse, which saw only 574 new vehicles sold.
Motor dealers resumed selling midway through May and with a full month of sales expected for June, there is hope that some normality will return to the market. It will not be an exciting normality.
Mike Mabasa, CEO of the National Association of Automobile
Manufacturers of SA (Naamsa), said SA’s miserable economic prognosis “does not bode well for the motor industry over the medium term”.
That is why Izumi thinks Nissan SA’s initial post-Covid production capacity will be no more than 60% of what it was before. Sacke hopes Isuzu SA can reach 80% by the end of the year.
The challenge for both companies is that they rely overwhelmingly on the local market for sales. Their export efforts are targeted almost exclusively at the rest of Africa, where sales had collapsed even before the arrival of Covid-19. Other companies sell their vehicles around the world.
BMW SA and MercedesBenz SA, both of which export more than 90% of their production, are meeting pent-up foreign demand. Toyota SA and Volkswagen SA are also heavy exporters, though not to the same degree. Kirby hopes his company can build 99,400 vehicles this year, compared with 141,000 in 2019.
VWSA MD Thomas Schaefer hopes for a smaller deficit — 140,000 against 162,000.
But access to foreign markets is no guarantee of success. Exports of 10,819 vehicles in May were 64.1% below last year’s 30,152, but a big improvement on April’s 901. After five months, aggregate exports for the year so far are 89,054 — 41.3% behind last year’s 151,694.
Mabasa, though, is bullish. “Vehicle export numbers are anticipated to start gaining momentum again,” he said.