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New vehicle dealer confidence at 13-year high

But a third wave of the Covid-19 pandemic may put a spanner in the works for South Africa’s motor retail sector.
Image: Andrey Rudakov/Bloomberg

Despite the apparent rebound in consumer demand, the inability of new vehicle dealers to supply prospective customers with the vehicles that they demand may yet inhibit the pace of the new vehicle sales recovery in the second half of 2021, the Bureau for Economic Research (BER) has warned.

The BER nevertheless reported in its latest retail trade report that new vehicle dealer confidence improved to a 13-year high to 63 on a 100-point scale in the second quarter of 2021 from 35 in the previous quarter.

By contrast, retailer confidence increased to a six-year high of 54 in the second quarter of 2021 from 37 in the first quarter.

Wholesale confidence increased by 5 index points to a healthy 63 in the second quarter.

The BER said confidence levels in the motor trade improved as sales posted another strong performance.

“Indeed, improved trading conditions relative to the second quarter of 2020 [where there was no activity at all] certainly supported the improvement in sales volumes of both new and used vehicles,” it said.

Listen to Simon Brown’s interview with Anchor Capital’s Casey Delport on retail sales (or read the transcript here): 

The BER added that new vehicle sales volumes jumped from -58 to an impressive 51 index points in the second quarter of 2021.

It said the improvement in sales volumes, particularly of new vehicles, coincides with the uptick in durable goods sales volumes.

“This may suggest a bounceback in confidence levels of high income earners fuelled by the prospect of a better-than-expected domestic economic recovery, a stock market that has been trending up, a stronger rand exchange and sustained low interest rates,” the bureau noted.

“In addition, given the fragile labour market at the peak of the pandemic, high income earners spent far less on new vehicles and overseas holidays last year … All these factors certainly strengthened the balance sheets of a number of high-income households,” it said.

However, the BER said dealers remain concerned about global supply disruptions that are causing stock shortages, particularly of semiconductors, which have hampered the manufacturing of new vehicles.

The bureau’s second quarter survey was undertaken from 12 to 31 May this year.

Senior executives in the retail, wholesale and motor trade were surveyed on whether their sales volumes, selling prices and profitability were up, down or the same relative to last year in the same quarter and did not request any figures.

Since then President Cyril Ramaphosa moved the country back to Covid-19 Level 3 lockdown regulations at midnight on June 15 and subsequently to a Level 4 lockdown at midnight on June 27 as a third wave of the pandemic resulted in a rapid acceleration in infections.

Read: SA bans alcohol, closes schools to curb virus surge

The Level 4 lockdown regulations will be reviewed in 14 days.

Commenting after the announcement of only the first of these elevated lockdown levels, the BER said that with South Africa now in the midst of a third wave of the Covid-19 pandemic, risks lie ahead for the entire trade sector.

The bureau said that the very slow vaccine rollout could see renewed lockdown restrictions to curb the spread of the virus, harming the sector.

The weak labour market, as well as the power supply crisis at Eskom, also do not bode well for the trade sector in general, it said.

“Although it is important to emphasise these considerable risks to the outlook for the third quarter, the BER’s latest results were nevertheless remarkably positive and point to stronger than initially anticipated growth in the trade sector during the second quarter of 2021,” it said.

Listen to Nompu Siziba’s interview with BER economist Tshepo Moloi or read the transcript here

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New Car prices are insane !! Seem to have mad since Covid : Now we are being invaded by 3rd world Indian and Chines junk ,but I that’s what RSA has become as well.
My new car days are done.

New Car = bad investment = not an asset

Buy used and never have any regrets!

Or, buy new, maintain, and keep for 20 years.

The reported loans, billions, working their way down to kick start a economy, will eventually make a stop by car dealers. This is a old cooky, crumbling a long time.

End of comments.

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