The Covid-19 pandemic has seen six amalgamations between dealerships from April 1 to September 30, as well as the sale of 19 dealerships and the closure of 38 dealerships among the members of the National Automobile Dealers’ Association (NADA), the association’s national director Gary McCraw tells Engineering News Online.
According to statistics from the Motor Industry Bargaining Council (Mibco), 16 183 jobs were lost in the total South African auto retail aftermarket from March 1 to September 30 – not just dealerships, he adds.
“Unfortunately, we are excepting more given that many businesses are still finalising consultations as per labour law requirements, so this number is due to increase.”
McCraw says dealerships that intervened early on to protect cash flow and right-size operations are the ones that have been able to weather the storm.
“Successful dealerships realised early that if new vehicle sales were low they needed to market their used vehicle, workshop and parts departments more actively to ensure greater contributions from those departments to the bottom line.
“Many dealers were also able to negotiate revised terms of credit with their financial institutions, landlords, suppliers, and so forth, thereby controlling and protecting cash flow within the business.”
Survival of the Fittest
The South African retail motor industry is coming to grips with the new normal after a demanding and difficult trading period through the heavy stages of lockdown, says NADA chairperson Mark Dommisse.
Most dealerships have right-sized their operations and tightened financial controls over the past six months to counter the downturn in vehicle sales, service appointments and parts sales.
Dommisse says that if a dealer is not at least breaking even at this stage, heading into the last quarter of the year, then its management must act quickly to do so.
“It really is survival of the fittest at the moment. Businesses need to adapt and evolve in the changing climate in order to survive.
“It’s really tough out there and we can’t bob and weave our way out of trouble at this stage. We must face the challenges head on,” he advises.
“Even if dealers are making some profit, this is not the time to rest on laurels. There is still worrying economic news on the horizon, including a shrinking car parc with relatively few sales to rental companies and a lagging wave of unemployment in the middle class, which makes up an important component of our customer base.
“Hopefully, operating in Level 1 of the lockdown, some of the retrenchment flow will be stemmed.”