The National Association of Automobile Manufacturers of South Africa [NAAMSA] said that the automotive industry across the world is currently experiencing unprecedented challenges due to the global lockdowns implemented across all major auto manufacturing countries and cities to flatten the COVID-19 curve. South Africa is not an exception and the local automotive industry supports all measures announced recently by President Cyril RAMAPHOSA during the implementation of the country’s 21-day lockdown.
As expected, the aggregate domestic new vehicle sales numbers continue to decline at the back of the recent developments around the coronavirus and challenging economic conditions in the country. The new vehicle sales statistics for March 2020 reflects a substantial decline of 14 150 units or 29,7% from the 47 695 vehicles sold in March last year to the aggregate domestic sales of 33 545 units in March 2020. Equally, export sales at 28 883 units also registered a huge fall of 7 905 units or a decline of 21,5% compared to the 36 788 vehicles exported in March last year. The performance of vehicle exports over the course of 2020 is linked to the duration of the Covid-19 pandemic and its impact on the global economy.
Overall, out of the total reported industry sales of 33 545 vehicles, an estimated 28 042 units or 83,6% represented dealer sales, an estimated 6,2% represented sales to the vehicle rental industry, 5,8% to government, and 4,4% to industry corporate fleets. The March 2020 new passenger car market had registered a sizeable decline of 8 139 cars or a fall of 26,8% to 22 200 units compared to the 30 339 new cars sold in March last year. The car rental Industry’s contribution accounted for 8,4% of new car sales in March 2020.
Domestic sales of new light commercial vehicles, bakkies and mini-buses at 9 425 units during March 2020 had recorded a significant decline of 5 570 units or a fall of 37,1% from the 14 995 light commercial vehicles sold during the corresponding month last year.
Sales for medium and heavy truck segments of the industry also performed weaker and at 631 units and 1 289 units, respectively, reflected a decline of 146 vehicles or a fall of 18,8% in the case of medium commercial vehicles, and, in the case of heavy trucks and buses a decline of 295 vehicles or a fall of 18,6% compared to the corresponding month last year.
COVID-19 has a huge macro and micro economic impact globally as well as in South Africa. In line with the temporary closure of global facilities, the entire domestic motor industry also suspended production in view of the nationwide lockdown imposed on midnight, 26 March 2020. As a result, the industry lost three working days during the month impacting negatively on the March 2020 domestic new vehicle sales and export sales.
South Africa was already in a recession before the COVID-19 had any significant impact. In exacerbating the situation further, the Moody’s rating downgrade during March 2020 comes at a time that the country is in the midst of pulling all its resources and capacity together to mitigate the impact of COVID-19 across the economy. The country’s resources and capacity are being stretched in addressing this extraordinary situation and the downgrade opens another major challenge for South Africa.
The ABSA Purchasing Managers’ Index [PMI] experienced the weakest quarterly performance since 2009. The index tracking expected business conditions in 6 months’ time fell in March 2020 to below the lowest reading recorded during the 2008/09 global financial crisis and, in fact, the lowest level on record. This means that the worst is yet to come for the manufacturing sector.
A glimmer of good news is that the South African Reserve Bank has cut its benchmark interest rate during March 2020 by the biggest margin in more than 10 years aiming to support an already fragile economy and to ease the financial conditions of households and firms to the short-term economic implications of the COVID-19. The global automotive industry is contributing immensely with several initiatives during lockdown period across the world. Collectively, we are working with our respective Governments to support our country’s essential services, such as offering factories to produce ventilators and other medical equipment urgently required to fight against COVID-19. The NAAMSA CEO Council will be meeting tomorrow to consider what else the South African automotive industry can do to support Government efforts to reduce the impact of COVID-19 in South Africa.
The performance of exports would remain a function of the performance and direction of global markets. The fall in global vehicle demand as a result of restrictions on consumer movement would become clearer in the industry’s export sales over the short term.
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