Brian Joss – 01 June 2020: New vehicle sales looked for a jump start as the industry resumed activity from a practically dormant April.
Levels of activity and sales during May showed the very real impact provided by the decision to allow the motor industry to return to work under Alert Level 4. This positive step towards the re-opening of one of the largest contributors to the economy will have accelerated the return to some level of normality for the motor industry as Alert Level 3 gets into gear.
However, WesBank warned that the industry should expect to face reduced levels of activity for the remainder of the year. “While we were reassured by the levels of demand from consumers and business judged by volumes of applications for finance during May, we shouldn’t expect sales to return to any form of normality for the remainder of the year,” says Lebogang Gaoaketse, Head of Marketing and Communication at WesBank.
WesBank applications volumes across new and used vehicles were between 65% and 70% of the levels experienced during May 2019. “Trading conditions from May last year until February this year were reasonably consistent and representative of normal trading conditions before the country entered Alert Level 5 lockdown during March,” says Gaoaketse. “The industry’s ability to actually trade during May was also impacted by practical considerations of supporting administration as well as the actual appetite to conclude a deal in this environment.”
This wasn’t reflective of sales reported to the National Association of Automobile Manufacturers of South Africa (Naamsa). The new vehicle market during May recorded 12,932 sales in total as the industry spluttered into life, 68% down on May 2019 and approximately 30% of the market activity in the first two months of the year.
“Industry will be reassured by these initial levels of demand, but buying behaviours will inevitably be changing,” says Gaoaketse. “WesBank data indicates an increase in demand for used cars in terms of vehicle applications, supported by a larger than usual increase in the deal size of those used car finance agreements. This supports some forecast analysis of a trend for consumers to buy down into the used car market in order to reduce the size of their car repayments and mobility budgets.”
According to Naamsa, the new passenger car market registered 9,019 sales, 65.4% down on May 2019. The Light Commercial Vehicle (LCV) market was slower to start, selling 3,073 units during May, 74.8% down on the same period last year.
Of the 12,092 passenger car and LCV sales, 10,606 units (87.7%) were sold through the dealer channel. Government sales accounted for 892 units (7.3%) across these segments, providing some welcome stimulus.
“These low levels of activity are no surprise,” continues Gaoaketse. “While we expect a slow resurgence of activity, necessary access to repairs and maintenance will have been appreciated by consumers and businesses alike.
The move to Alert Level 3 from today will begin to provide more general access to dealer facilities and trade.”
Industry will be hoping that demand will return as dealers fight for survival. A further reduction in the interest rate has provided a 2.5% relief for consumers and businesses since lockdown commenced, which should provide some level of assistance for indebted customers, while providing stimulus for new deals.
“These May volumes are reassuring given the slow resumption of activity during the month from such an unprecedented circumstance,” concludes Gaoaketse. “With a full month of sales ahead and more freedom within Alert Level 3 regulations, we will begin to understand what the new normal level of activity will be in the new vehicle market.”
CAPTION: Spluttering to life: Lebogang Gaoaketse, head of marketing and communication, WesBank. Picture: Motorpress.