The National Association of Automobile Manufacturers of South Africa (Naamsa) says the country's automotive industry will likely see a “slow recovery in coming months” but cautions “a lot of manufacturing capacity will remain idle for some time”.
The organisation made the comments after releasing its new vehicle sales report for April 2020, confirming that just 574 vehicles (a 98,4 percent year-on-year decline) were registered in South Africa during the month.
Of course, the country has been on lockdown since March 26 thanks to the COVID-19 pandemic, with factories and dealerships having been shuttered for the whole of April.
“The 98,4 percent drop in new vehicle sales is a true reflection of the South African economy at the back of a 35-day hard lockdown where economic activity was not possible because the country prudently elected to support the imperative to contain the COVID-19 virus and save lives,” said Michael Mabasa, CEO of Naamsa.
The organisation said vehicle and automotive component production, as the “bedrock of the country’s manufacturing sector”, was expected to “gradually ease back” under strict risk-adjusted measures.
Exports for the month, meanwhile, totaled just 901 units (down from 32 892 in April 2019), with some 880 coming from the light commercial segment. Naamsa said the performance of exports over the course of 2020 remained “linked to the duration of the COVID-19 pandemic and its impact on the global economy”.
“Businesses and consumers are currently uncertain on what the future holds through the lockdown restrictions, with unemployment rate increases, negative exchange rate impact, negative annualised GDP growth rate, and Moody’s and Fitch’s rating downgrade all putting pressure on disposable income and debt levels,” Naamsa said.
“All of this translates into low business and consumer confidence, which will cause a delay in big purchases such as vehicles. While some easing of restrictions from May should aid a slow recovery in coming months, a lot of manufacturing capacity will remain idle for some time,” the organisation said.
“The industry is under no illusion that this is going to be a very difficult year ahead. However, the cut of the interest rate by a further 100 basis points during April 2020 will not only assist indebted consumers and businesses in the short term, but also help restarting industry sales once the country resumes business. The reduction in fuel prices will also contribute while the oil price remains low.”
Naamsa added the performance of exports would “remain a function of the performance and direction of global markets”, pointing out the impact of the fall in global vehicle demand would “become clearer in the domestic industry’s export sales over the short to medium term”.