The depreciation of the rand could see new-car prices increase by up to 10% over the next quarter, says National Automobile Dealers' Association (Nada) chairperson Mark Dommisse.
He says the dealership environment is currently seeing a “resilience” in the used-car market, with a “bit of hunger” from the car-buying public for these vehicles. The new-car market, however, is “still a little bit weak at this stage”.
Dommisse says the used-car market is being aided by rental defleeting, as rental companies currently have almost no customers as the tourism industry remains under lockdown.
“There cars are going to represent a very good opportunity for consumers out there, who are not going to get into Uber, I can assure you.
“Effectively this means there are a lot of cheap used cars out there at the moment, that will effectively become cheaper because of the pricing pressure on new cars,” says Dommisse. “So, it is going to a very interesting dynamic between the new and used markets. Without a doubt new is going to take some time.”
Dommisse says trends currently evident at dealerships show that South Africa’s car parc is in need of servicing and repairs following the easing of the Covid-19 national lockdown to Alert Level 3.
“The industry is relatively positive about the workshop stream this month [June], so that is quite a nice positive.”
It is also clear that consumers are buying into the lower, cheaper vehicle segments.
Dommisse says there remain a number of reasons why people want to buy cars – new or used – including buying down to restructure their financial obligations, or to buy a new vehicle as the old one becomes unreliable or starts costing money.
“So, there is that element where people are amazingly buying vehicles now.”
As for vehicle parts, Dommisse says Nada members are not currently experiencing any major supply disruptions.
“There will be normal understandable supply issues, but I’m not seeing anything turning into a crisis at this stage.
“However, on the parts side of the slightly older car parc, there could be a bit of a challenge, but there is the aftermarket for that. The current priority for factories making parts all over the world is to supply the new parc.”
Dommisse says Nada is expecting a U- or L-shaped recovery in the South African economy as it deals with the fallout of Covid-19 pandemic.
* Dommisse spoke during a M&G webinar on the automotive industry.