Market braces for 80% nosedive in new car sales this April

New car sales are expected to plummet by as much as 80% in April.

So said Chris de Kock, CEO of vehicle financier WesBank, in an exclusive interview with TimesLIVE Motoring this week.

According to past figures from the National Association of Automobile Manufacturers of South Africa (Naamsa), a total of 36,794 new vehicle sales were recorded in April 2019.

While hopeful that signs of recovery could be seen from May, De Kock said the effects of Covid-19 are forecast to negatively impact overall new car sales by as much as 20% this year. That could translate into a decrease of 107,325 units. In 2019, a total of 536,626 new vehicle sales had been reported.

In February, before the pandemic escalated to its current scale and when the company released its annual prediction, it foretold that 518,000 vehicles would be sold this year.

“If we do emerge from lockdown as planned, I do not see people looking to buy,” referring to the national intervention measure currently in effect since March 27, set to lift at midnight on April 16.

“That would leave a week [for vehicle purchases] and April might have 20% of the usual figure, government is not going to make purchases and car rental agencies have de-fleeted en masse.”

He expressed concern for dealerships that would be hard hit. “They have no income, only their workshops are open for essential services. You cannot buy a car now, there is not a large amount of stock in systems and plants have been shut.”

Naamsa reported that 33,545 new vehicles were sold locally in March. This represents a decrease compared with the same month in 2019, where 47,718 units were recorded.

It described in a statement that current challenges faced by the automotive industry across the globe are unprecedented, acknowledging, however, that our country “was already in a recession before Covid-19 had any significant impact” and that the recent downgrade to sub-investment status by ratings agencies Moody’s and Fitch had exacerbated the situation.

Although the association noted that “the worst is yet to come for the manufacturing sector,” it praised the Reserve Bank’s move to cut the benchmark interest rate last month. Naamsa said it would engage in discussions about ideas to assist government in reducing the impact of the coronavirus.

Meanwhile, De Kock advised that customers in a position to honour their monthly car instalments, should continue doing so.

Last week we approached the vehicle finance divisions of the big four banks, including WesBank, which detailed relief measures to customers whose earnings may be impacted during this time. De Kock emphasised that the concessions were to be viewed as “cashflow relief” rather than “financial relief".

“Some have referred to payment extensions as ‘payment holidays’, First Rand has not, because it could give customers the wrong impression. Those who are concerned, those who are struggling, reach out, this will not affect your credit records,” he said, noting that assistance plans are only for individuals who are already in good standing.

Drawing a parallel between the current market situation and the economic crisis of 2008, De Kock observed that institutions lent differently in comparison to now. “There is talk to say this is a V-type impact: it went down fast but it could rise fast, but there are many views.”

He believed that the majority of WesBank customers would still be able to service repayments, adding that stricter lending criteria mandated by the National Credit Act of 2007 ensured “a customer base with stronger affordability".

At the time of publication, he said 13,397 individuals had submitted requests for relief and that the biggest impact had been seen among customers in the self-employed category.