WELCOME TO THE ‘NEW NORMAL’ WHATEVER THAT IS!
I have been on earth for more than seven decades and been involved with several aspects of the South African motor industry for more than 50 years, but I have never experienced the morale so low or seen the virtual destruction of the motoring world as we know it.
It all happened in a few weeks and due to a strange virus, that originated in China at the end of 2019, but has since spread quickly through virtually all countries in the world, wreaking havoc with economies and employment, with the global motor industry a huge loser on all fronts.
I have lived through a number of major disrupters in my working career, ranging from several tumultuous changes in the South Africa political landscape to a 42-day strike at Toyota, the global economic meltdown of 2008 and the impending drive for alternative fuels for vehicles. But nothing has been as devastating and disrupting as the onslaught by Covid-19 and the ensuing lockdowns.
All sectors of industry and commerce are wrestling with the wide-ranging effects on the way they do business while the pandemic is resulting in the South African government, which is already overstretched financially, racking up a host of new loans that will be very expensive to service over a considerable period of time. This is particularly true now that we are ranked as another junk status country by all the ratings agencies. Add in the way the price of oil has tumbled while demand has declined sharply, and we have a perfect storm!
I have listened to several webinars on the way forward for the motor industry but planning for the future is now an unknown science because everyone is looking to doing things differently. How exactly it will all pan out is the big question. Nobody really knows.
Signs are already out there that the swing to alternative powerplants and developments such as autonomous driving vehicles are stalling. Mercedes-Benz has just announced it will no longer be involved in hydrogen as a fuel for passenger cars but has set up a serious joint venture with Volvo Trucks to develop hydrogen-powered commercial vehicles, while some electric vehicle joint ventures are being cancelled or re-evaluated.
The immediate challenge for all global vehicle manufacturers is to get back to profitability with ambitious – and expensive – new technologies moving to the back burner, except where production has started already, such as the case with the Volkswagen Group, which is launching its new range of battery-electric vehicles.
There have been many shocks here in SA and globally as major players in the business world have gone to the wall as the pandemic takes its very heavy toll. The virus has also been very tough on smaller businesses and start-ups too. The global business landscape is changing rapidly.
One of the biggest shocks for us in the motor industry environment has been Hertz, the 102-year-old rental car company, filing for Chapter 11 Reorganisation following bankruptcy in the United States; this is the same path walked albeit successfully by General Motors and Chrysler when they were victims of the global economic meltdown in 2008/9 and Hertz could still make a comeback.
Hertz is not only the second largest rental company in the US, but also has a number of subsidiaries, including Dollar, Thrifty, Firefly, Hertz Car Sales and Donlen. Its international operations in South Africa, Europe, Australia, and New Zealand will not be affected. The Hertz franchise in Southern Africa is operated independently by CFAO Motors and says it will continue to offer rental cars in SA, Namibia, and Botswana.
Hertz had 560 000 vehicles in its US fleet when it went to the government for help – including some of the latest, mid-engine Chevrolet Corvettes! Disposing of so many cars will substantially impact the used vehicle market in the US, where Bloomberg says prices had already dropped 11.4% between March and April.
This sad situation underscores the uncertainty faced by all industries linked to airline travel and tourism. The big question is how long the drop in business will last. It is all so sad, particularly when a business like Hertz, with such a long history, reaches such a crisis.
Unfortunately, it seems as though motor sport is going to be a big loser going forward, which is not good news for the writer and his friend, Ian Groat, the publisher of Automotive Refinisher.
Not only is the Covid-19 pandemic resulting in race meetings being postponed or cancelled but it is likely that many of its sponsors will be having second thoughts on their investment in an expensive activity which may have to be staged without spectators.
It is all very worrying, and we are unlikely to see a clear path into the future for several months to come.
By Roger Houghton