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[TOP STORY] Are we seeing pent-up demand for new vehicles?

People are buying down and rental fleets are buying in anticipation of both internal and foreign tourists: Mark Dommisse – chair, National Automobile Dealers Association.

SIMON BROWN: I’m chatting now with Mark Dommisse, chairperson of the National Automobile Dealers Association. Mark, I appreciate the early morning time. May’s vehicle sales are out. The trend continues with rising sales happening in South Africa. The question I suppose is: are we seeing some pent-up demand? Is there evidence that these are folks who perhaps would’ve bought a car in 2020, perhaps even in 2021, but simply couldn’t get out of the house because of lockdowns, and who are now coming a couple of years later to renew vehicles?

MARK DOMMISSE: Hi, Simon. Yes, that’s a really interesting question, so thank you very much. Sometimes we also scratch our heads as to where the demand is coming from, because the market is so dynamic and there are so many different things happening to the economy and we are hitting so many bubbles. One of the things I can put it down to is really good value in the mid-segment, which is really the sub-compact SUV segment. The value there is just frightening in terms of what somebody can get for R250 000 to R350 000 and the value they can get in a car.

Also, even though interest rates are climbing, we still have had very low interest rates for quite some time now. At the end of the day, as the main mode of transport in South Africa, people need new cars. It’s just one of those things. So, from that perspective, the cost of ownership versus value does present quite a good opportunity for buyers. Like you have said, after a bit of stability, despite everything going on in the world, certainly some delayed purchases are being seen now – definitely in the new car segment.

SIMON BROWN: I was going to ask you next if people are buying down, but you’re suggesting yes, maybe buying down in terms of price, but not necessarily in terms of value for money or quality that they’re getting.

MARK DOMMISSE: Definitely, definitely. I think as an added bonus, however, those vehicles are very frugal on petrol or diesel. So for a 1.5-litre turbo nowadays you are getting sort of six litres per hundred [kilometres] if you drive nicely – so six or seven litres probably. Anything under eight is very solid.

But [with] those small sort of sub-compact cars you can get a really good rate. And there’s everything in the car. It’s [Apple] CarPlay/[Android Auto]. It’s aircon, it’s driving features like adaptive features and stuff like that. So the tech and the safety elements in vehicles are brilliant.

SIMON BROWN: Yes. That tech sort of works its way down. I remember watching cars when windows were windy [down] and only fancy cars had automatic windows. And now everyone gets normal [automatic] windows.

MARK DOMMISSE: Everyone gets windows, yes. And a rear-view mirror.

SIMON BROWN: Yes. Even the folks in the back seat. Rental fleets are also buying. They were 7.9% of May sales, and that in a roundabout way says they are restocking. I appreciate they de-stocked significantly during the pandemic, but they’re obviously buying in anticipation of some tourists coming through, both internal and foreign.

MARK DOMMISSE: Very, very much so. The rental story is actually a very good one. Last month we were 20% up on purchases. This month a bit less, about 17%, but that’s with choked demand. So the rental companies are actually trying to buy more; they just cannot get supply. Right now the OEMs [original equipment manufacturers] are really supplying more dealers.

If the rental companies could buy more cars, they’d probably buy double, which is a fantastic indicator for our economy that there’s a huge amount of activity, as you say, locally and on the tourist side.

So we are probably going to see rental companies fleet up significantly in the last half of the year for the summer season for tourism. But they are certainly at very high utilisation rates, which is a great economic indicator.

SIMON BROWN: The challenge remains simply supply. I chat with Motus, I chat with Combined Motor Holdings, and the issue is simply getting the cars.

MARK DOMMISSE: Absolutely. So many things are playing as a factor to that. We talk about the [micro]chips. It’s not only that; the global logistics crisis or logistics constraint that we are facing right now is really, really frightening. The cost of shipping, the cost of containers, the rand/dollar and our strategic location are not optimal for shipping of goods where we sit in the world physically in South Africa. So those constraints are very, very big.

The whole China situation’s not helping, [nor is] the supply chain where all those manufacturers get their parts from – all over the world. A lot of that is related to China and that makes a really, really big problem.

SIMON BROWN: Yes. We’d all hoped it would be gone by this time of 2022, but that is patently not the case.

Mark Dommisse, chairperson of the National Automobile Dealers Association, I appreciate the early morning.

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