The South African new-car market could decline by around 20% this year on the back of the Covid-19 pandemic, says Auric Auto BMW dealer principal and former National Automobile Dealers’ Association (NADA) chairperson Eric Scoble.
“Lockdown means economic activity ceases. It doesn’t matter if your business can continue, if others can’t continue they can’t buy things from you.
“What is the impact on car sales? No doubt we’ll see the car market drop in April. The question is, if you take one month out of year, is there going to be a bounce back?”
Scoble believes there may be a bounce back in “a couple of model lines” that are essential vehicles, such as a farmer who needs to replace his bakkie.
However, he does not anticipate a recovery in the market that travels from A to B.
Also, “the car rental market will disappear for much of the rest of the year. That will take about 8% out of the market”.
Scoble adds that 2020 was never going to match 2019 in terms of new-vehicle sales, as the year started on a poor footing, with large-scale load-shedding from energy provider Eskom, which was going to push the market down between 2% and 4%, even before the global onset of Covid-19.
He also notes that new-vehicle sales are generally closely linked to economic growth.
“The best guess we have is a multiplier effect of 2.5. In other words, if the economy grows by 1%, the car market will grow by 2.5%. If the economy grows by 3%, the new car market grows by 6%, 7%.
“So, the critical approach to this year is to what extent the South African economy will contract in 2020 versus 2019. Every day the number changes.”
Scoble says the Chinese economy contracted by 6.8% in the first quarter of the year.
“The Chinese economy was growing last year, probably at around 6%, so that is a net effect of 12%.
“If our economy was going to grow by at least 0.2% or somewhere around there, and the impact is double that, our economy can contract between 8% and 12% this year.
“If that happens, the car market is likely to contract between 25% and 30%.
That is the reality.”
A number of positives may, however, soften the blow.
“Some [model] lines will bounce back. Some manufacturers went into the lockdown with some kind of order book.
“It also depends on whether you sell cheaper cars. All these things can build [the new-car sales] number.”
The reaction of vehicle manufacturers into building more affordability into their cars following the lockdown, will also “be critical”.
“The other thing running in our favour is the fuel price, which is coming down and is likely to stay down for the rest of the year and put a few rands in everyone’s pocket,” says Scoble.
“The [drop in] interest rates will also put a few more cents in people’s pockets.”
In the end, says Scoble, the South African new-car market could be down 20% this year compared with 2019 numbers.
* Scoble spoke during a NADA webinar held on April 17.