There is no way of sugar coating the massive decline in the automotive market in March this year.
According
to the official vehicle sales statistics, as aggregated by the National
Association of Automobile Manufacturers of SA (Naamsa), only 33 545 new
vehicles were sold in March this year. That represents a drop of 29.7%
or 14 150 new cars, trucks and bakkies when compared to the same month
in 2019.
At the same time, vehicle exports from the seven large
manufacturers dropped by 21.5% or 7 905 vehicles when compared to the
corresponding month last year.
The biggest percentage losses were
recorded in the light commercial market, which is already down by 37.1%
compared to the same quarter last year. The passenger vehicle market
recorded a decline of 26.8% for the same period, which in absolute
numbers are significantly more that the light commercial market.
To
blame this decline solely on the national lockdown would be incorrect,
since dealers and manufacturing plants only lost three and a half days
of sales and production in March, but the COVID-19 virus and its impact
on sales and production certainly had a major effect.
With so much red ink in the sales report, it is difficult to find any reason to be positive.
Keep
in mind that COVID-19 hit some international markets, especially China
and Europe, well before becoming a major issue in South Africa. This has
impacted the flow of vehicles for export and it certainly kept many
private and corporate buyers away from the sales floor as they kept
their eye on the developing pandemic, with some businesses reporting
restricted trading from as early as 15 March.
General economic malaise
Vehicle
market analysts at Nedbank and elsewhere highlight the fact that the
general economic malaise and the fact that South Africa has been in a
technical recession since the second half of 2019 have impacted consumer
and business confidence levels well before the arrival of the COVID-19
virus.
Speaking of confidence levels, Naamsa quotes the Absa
Purchasing Managers’ Index, which measures current and future purchasing
intentions and acts as a barometer of business confidence. At 48.1
index points in March, this index points to a general negativity in the
market (below 50 is pessimistic), and it is currently at its weakest
level since the first quarter of 2009.
Interestingly, Nedbank’s
research points out that this is also the weakest start to a year since
2009, after the 2008 economic crash. In 2009, the quarter was 34.2%
lower than the first quarter in 2009 and this year, the market is
already 12.8% down on the first quarter of 2019.
With so much red
ink in the sales report, it is difficult to find any reason to be
positive. Keep in mind that 2009 was the result of the market declines
in 2008 and early 2009, while the current 2020 sales figures only
reflect the news and economic activity that existed before the lockdown.
It
is anyone’s guess how much the post-lockdown economic news, such as
South Africa’s Moody’s downgrade to junk status and the loss of trading
for 18 days (out of 21) would still drag sales figures down further. Put
differently, there will be a double whammy in the sales figures
post-March, with additional negative international and local economic
news and a loss of trading days that will add to the current negative
factors.
All eyes will be on April’s sales figures to see
how production has been affected and many retail sales were lost in the
lockdown period
One should also factor in the impact of
the recent weakening of the rand. While local manufacturers will be able
to partially offset R18 to the dollar and R19+ to the Euro with the
money they earn from exports, this may be less than in the past as
exports to COVID-19-hit countries remain on hold or slower than before.
For
pure importers, the weak rand will severely impact their pricing and
profitability. Anecdotally, many brands have said that a rand that is
weaker than R18 to the dollar or Euro makes it impossible for them to
trade.
Reporting by Naamsa less detailed
Analysing
the monthly sales data has become more difficult, after Naamsa stopped
reporting individual model sales and detailed segment analysis. This is
to be expected, after BMW and Mercedes-Benz stopped their detailed sales
reporting to Naamsa, with others, like Porsche and Bentley, only
reporting aggregate figures.
In the reported figures,
Mercedes-Benz’s sales remain an estimate, while BMW’s figures are
considered more accurate. They have agreed to report their sales every
quarter, so the March figures represent a more accurate view of what BMW
has done in the past three months.
From the sales report, Toyota
remains the market leader with sales of 8 715 units. Volkswagen is a
strong second with 5 499 units sold. After that, all the other
manufacturers show a significant drop in sales, with Nissan selling only
2 775 units to come in third and Ford taking fourth with 2 667 units
sold.
In the hotly contested middle of the sales rankings, Suzuki
(1 279 sales), Haval (923 sales) and Mahindra (544 sales) remain
relatively strong, although they are also off their recent records. It
is clear that these brands’ focus on affordability and value for money
has won them many new customers in this tough market.
Lower down
the sales ladder, brands like Honda (267 sales), Peugeot Citroën (108),
Opel (107), Mitsubishi (106 sales) and Subaru (36 sales) show signs of
real pain.
All eyes will be on April’s sales figures to see how
production has been affected and many retail sales were lost in the
lockdown period. It will also give analysts a better idea of how much
momentum was lost and – given that car sales are often seen as a good
leading indicator of economic growth and decline – what we can expect
from the economy in general.
Featured image and infographic courtesy of Wesbank
