Unemployment and Corona put brakes on new car sales in SA

Johannesburg – South Africa’s high unemployment rate and poor economic outlook will hurt the new cars market, according to Fitch Solutions’ latest forecast.

The organisation’s Autos Sales Risk/ Reward Index saw South Africa’s overall score weaken to 44.6 out of a possible 100, down from 45.1 previously and ranks the country at number 75 globally in terms of competitiveness.

The extent and quality of South Africa’s transport network far exceed that of its regional peers, reflected in its score of 59.7 out of a possible 100 on its quality and extent of transport network indicator, compared to the sub-Saharan Africa regional average of 22.4. South Africa’s high score of 78.2 on its vehicle sales volumes indicator (based on our five-year average forecast) reflects its status as one of region’s largest vehicle markets.

“Despite South Africa’s large underlying potential market size, it receives a poor score of 25.8 for its spending population. This can be attributed to high levels of unemployment in the country, which acts as a drag on the size of the consumer base that is in a position to afford a new vehicle,” Fitch Solutions analysts wrote.

“South Africa’s low score of 4.0 out of a possible 100 in its vehicle sales growth indicator [which is also based on our fiveyear average forecast] lags well behind the SSA regional average of 57.6 out of a possible 100, highlighting the limited growth opportunities on offer for automakers in the country when compared to regional peers.”

The latest vehicle sales released on Thursday painted a picture of an industry under intense pressure. The data showed that total vehicle sales in South Africa fell 10.1% year on year to 37 493 units in December of 2020. On a monthly basis, vehicle sales declined 4.1%.

The sales volumes of new cars are a good gauge to see the performance of the economy and track consumer and business confidence in the economy.

Mikel Mabasa, the CEO of the National Association of Automotive Manufacturers of South Africa, said sustained higher economic growth rate is essential to support higher domestic new vehicle sales volumes. “The longer the constraints of Covid-19 continue, the greater the impact on the automotive industry and the broader economy. In terms of the domestic automotive industry’s recovery, much will depend on the recovery of its main trading partners and the pace at which the lockdown measures are phased out, considering that well over 60% of the country’s vehicle production is exported,” Mabasa said.

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