South Africa's auto industry trade group NAAMSA has described 2020 as an "extraordinary year that has brought unprecedented challenges to the country's economy in general and the automotive industry in particular".
NAAMSA said the new vehicle market in December, albeit at a slower pace, with aggregate industry new vehicle sales at 37,493 units declining 10.1% year on year. Last month's new passenger car market and light commercial vehicle market reflected a mixed performance with a decline of 14.4% for new cars and an increase of 3.2% for light commercial vehicles. Sales of heavy commercial vehicles and buses remained weak, declining 15.6%.
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Exports increased 36.3% year on year last month to 18,479 units, 4,919 units higher than in Dec 2019.
Of total reported industry sales of 37,493 vehicles last month, an estimated 33,750 or 90% represented dealer sales, an 6% were to the rental
industry, 2.5% to government, and 1.5% to corporate fleets.
New vehicle sales has fallen 2.8% in 2019 and NAAMSA said "the crippling effects of the COVID-19 pandemic" resulted in a massive decline in new vehicle sales of 29.1% to 380,449 units 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," the organisation said in a statement.
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By GlobalData"The significant fall in aggregate new vehicle sales occurred despite a 300-basis point interest rate cut during the year to a near 50-year low. South Africa entered a recession before the outbreak of COVID-19, which means middle class disposable income was already under pressure prior to the
national lockdown," NAAMSA said.
"The vehicle rental industry, which is a major seasonal contributor to the new vehicle market, also effectively remained dormant due to the lockdown restrictions on business travel and tourism for most of the year.
"Current market conditions in the passenger car and light commercial vehicle markets continued to be characterised by a buying down trend with sales of pre-owned vehicles being the most enticing option in the current economy. The premium car segment had continued to experience significant pressure in 2020.
"Although 2020 sales of medium and heavy commercial vehicles showed signs of resilience, the weak performance compared to 2019 also mirrored the impact of the COVID-19 country lockdown restrictions coupled with the ongoing weak macro-economic climate in the country."
Exports declined 29.8% to 271,819 units in 2020.
NAAMSA said COVID-19 had 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.
"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 COVID19 waves," NAAMSA said.
"General expectations are for South Africa's economy to rebound sharply in 2021, from a very low base in 2020. However, tough months are still ahead before business and consumer confidence will be rebuilt. Prospects for faster growth over the medium term are likely to be constrained by new COVID-19 waves accompanied by stricter lockdown measures, needed fiscal tightening and persistent power-supply disruptions.
"The new vehicle market is expected to still face severe challenges of slow demand, rand exchange rate volatility and negative business and consumer sentiment during the first quarter of 2021.
"Although the current low interest rates, coupled with low inflation, could be regarded as a building block to stimulate the economy, a vehicle remains a big-ticket purchase consideration for any household budget and is consequently a key indication of market confidence. The focus for the industry now needs to shift to resilience, recovery, and creating strategies to deal with new business and consumer behaviour.
"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."
A year-on-year improvement of around 15% in new vehicle sales volume was projected for 2021, NAAMSA said. Exports were seen rising around 20%, and an improvement in industry vehicle production of about 18% was projected for 2021.
