National Association of Automobile Manufacturers of South Africa (Naamsa) expects a drop of roughly 25% in the production, sales and exports of new vehicles in and from South Africa, says Naamsa CEO Mike Mabasa.
“This is a huge number. When we started the year, the outlook was for a 5% decline, and that number has now gone down sharply. Covid-19 will have a major impact on the rest of the year.”
Mabasa does not expect the domestic new-vehicle market to recover as quickly as some markets abroad.
He says demand is influenced by a number of factors, such as the fact that South Africa entered a recession before the outbreak of Covid-19, which means middle-class disposable income was already under pressure prior to the national lockdown.
While Naamsa welcomes the South African Reserve Bank’s recent repo rate cuts, it will not be sufficient to aid vehicle sales to distressed households, says Mabasa.
Another big local customer is the vehicle rental industry. With the tourism industry still under lockdown under Alert Level 3, however, this will only serve to further delay the automotive industry’s recovery efforts.
Exports are impacted by the health of the global economy, with South Africa selling vehicles to 151 markets. “We have to wait and see what is happening there. In Europe, we have to see if we are still able to deliver, or if orders will be pushed back,” says Mabasa.
Taking all these factors into account, job losses will be inevitable, he adds. “If we lose a quarter of our production, there will be, without a doubt, casualties. The auto industry is a value chain and, if one part does not work well, the entire chain is not strong.”
Mabasa says government’s vehicle registration and licensing centres, which have been slow to open their doors, are currently throwing another spanner in the automotive industry’s recovery process. “If registration and licensing are not working in government, it has an impact on production.” Mabasa says Naamsa has also received feedback that some components manufacturers are “battling quite significantly”.