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SA car sales at record low

Show economy’s lockdown pain.
Image: Patrick T. Fallon, Bloomberg

South African new car sales plunged to a record low in April, showing some of the first measurable signs of the economic impact of the nationwide lockdown to curb the spread of the coronavirus.

Domestic vehicle sales dropped by 98.4% from a year earlier to 574 units, the National Association of Automobile Manufacturers of South Africa said in an emailed statement Monday. That compares with average monthly trade of more than 41 000 units over that last 20 years.

South Africa implemented one of the most severe lockdowns in the world from March 27, allowing most citizens to only go out to buy food, seek medical care and collect welfare grants. For five weeks only essential goods were allowed to be sold and that meant car dealerships had to close their doors and could only start trading again from May 1, subject to specific directions.

The Naamsa data show only 105 passenger cars were sold in April, a drop of 99.6%. Some of those may, however, be transactions that started in March and were only finalised and recorded last month. The data form part of the Reserve Bank’s leading indicator, which gives a sense of the future state of the economy.

While the drop in sales was to be expected because dealerships were closed “it is a disaster,” said Mike Schüssler, chief economist at Economists.co.za. “Consumer spending in South Africa at the moment will be a disaster. I suspect we’re going to get very big-double digit annualised declines in the gross domestic product numbers on the back of very, very weak consumption expenditure.”

Weak confidence
Consumer spending makes up about 60% of GDP. The economy contracted on an annualised basis in the last two quarters of 2019 and was stuck in its longest downward cycle since World War II even before the impact of Covid-19. That was due to rolling blackouts and poor business and consumer confidence weighing on output. National Treasury estimates show GDP could contract by as much as 16.1% this year, depending on how long it takes to contain the virus and for the economy to recover.

The automotive industry is the largest component of the country’s manufacturing sector and employs more than 100 000 skilled workers. The business activity component of Absa Group’s Purchasing Managers Index fell to a record low in the month.

LISTEN: Absa Economist Miyelani Maluleke discusses the all-time low PMI with Nompu Siziba

The country might not even be able to sell more than 60% of the 537 000 vehicles it sold last year, Schüssler said.

Exports from Africa’s largest automaker fell by 97.3% to 901 units, according to the Naamsa data. Car shipments were forecast to reach a record 391 000 units this year, the industry body said in a report before the lockdown.

© 2020 Bloomberg

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Hopefully this all leads to a drop in vehicle prices. Vehicles are grossly expensive.

the ZAR is going south fast, so i believe imported cars and car parts will go north. so much for a weak rand will benefit the country.

Wish again. New and used car prices are kept artificially high by dealers.

Who wants to buy a new car to sit in the garage and then have to pay a huge insurance premium for nothing? Might carry on for a long time to come. On and off.

Are companies still going to buy these fancy company cars for workers working from home and meeting on Zoom? Will it still be a tax deduction?

Is the new fancy car not just reserved for the corrupt government and their officials?

Actually some studies from China showing appetite to own cars increasing amidst decreases in many other consumer expenditure options. People not wanting to use public transport or ride hailing due to risk of contracting COVID or a future virus.

I can’t help noticing how cleaner the air is and how quieter my neighborhood is since the lockdown. It also feels a lot less dangerous on the roads when I go for a walk or cycle. Maybe we should adopt more of the Dutch and Danish alternative transport choice of cycling to get from A to B. We’d become a lot healthier, protect the environment and save a ton on expensive motor vehicle transport that have made us overweight and lazy. The benefits of cycling, where possible, outweigh the disadvantages.

Three problems with this otherwise sane thought
1) South Africa’s debt burdened middle-class is fixated with Western Europe’s shiny vehicles
2) South African’s debt burdened middle-class drives like getaway gangsters (almost competing with taxi drivers now)
3) Law enforcement (on and off the roads) is non-existent
I don’t really know how the Sandton experiment ended, but I imagine not that well.

End of comments.

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