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SA’s vehicle industry is still in for a rough ride. Iemas Financial Services reflects on recent performance and takes a look at what the future holds

03 September 2020 Iemas Financial Services

The South African vehicle industry continues to see a downward trend in vehicle sales since last year.

According the latest vehicle sales released by NAAMSA (National Association of Automobile Manufacturers of South Africa), August 2020 aggregate domestic sales declined by 26,3% (33 515 vehicles sold) compared to vehicle sales in August 2019 (45 484 vehicles sold). Export sales in August 2020 declined by a staggering 46,9% (20 623 vehicles exported) compared to 43 960 August last year.

The impact of COVID-19 on the vehicle industry

Since COVID-19 was declared a national disaster on 15 March 2020 by President Cyril Ramaphosa, and the national lock-down that followed, the economic environment rapidly deteriorated with consumer spending and business confidence plunging to all-time lows:
• Recent business closures and retrenchments will further contribute to South Africa’s enduring and longstanding unemployment that has already climbed to 30,1% in quarter one, 2020 (2019: 27,6%); and
• By quarter two of 2020, consumer confidence had dropped to -33, from -9 in the prior period. This is the lowest reading of consumer confidence since quarter two of 1985.
The unprecedented decision by the South African Reserve Bank (SARB) to reduce the repo rate five times by the end of July 2020 (with 300 basis points or by a staggering 46%) to stimulate the economy amid the economic turmoil was a further unexpected change with great impact on many sectors such as financial services. This stimulus will not only assist indebted consumers in the short-term, but will provide huge assistance to re-starting industry sales once the country resumes economic activity after the lockdown.

The outbreak of Covid-19 worsened consumer and business challenges/constraints, along with other global and macro-environmental challenges which are evident from the number of aggregate domestic vehicle sales and export comparisons below:

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QUESTION

The intention with lockdown was to delay or flatten the Covid-19 infection curve and give both the private and public healthcare sectors time to prepare for the inevitable onslaught. Did the strategy work?

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