Illegally imported used cars put the brakes on sales of new vehicles in SA

SA’s motor companies are blaming used-car grey imports after sales of new vehicles had another poor showing in September.

Naamsa, the body representing local vehicle manufacturers and importers, says about 300,000 of the 12.7m cars on our roads are illegal imports.

“Without doubt, grey imports displace new-car sales. Based on the suite of taxes applicable to new car sales locally, Naamsa estimates that this is costing the fiscus R3.8bn a year,” says Mike Mabasa, Naamsa’s CEO.

“Grey imports rob the fiscus of much needed-tax revenue, they hurt job creation, they aid criminal activity and undermine road safety initiatives. To put it into perspective, the monthly average new vehicle market for 2020 is 28,500 units. Grey imports represent an extra month's sales per year, which represents 7.5% of total market and would be the third-largest brand in SA by volume,” he said.

In a meeting on Monday with motor industry executives, trade, industry & competition minister Ebrahim Patel said he wanted an investigation into the growing number of illegally imported used cars on SA's roads, BusinessLIVE reported.

A used car may legally be imported only in special circumstances, including  by nationals and permanent residents returning from living abroad. Racing cars, vintage cars, inherited vehicles and custom-made vehicles for disabled people are also allowed.

However, the rules are being increasingly flouted, Mabasa told BusinessLIVE. Many used cars fitting none of these descriptions cross the border from neighbouring countries. Some are driven in with the correct documentation for tourism or business visits, and are then sold. Mabasa said grey imports cost SA more than R3bn in duties annually.

Naamsa on Thursday released September’s new-vehicle sales figures, which continued to improve in line with lower lockdown levels over recent months but still reflect a decline of 11,737 units (23.9%) compared to September 2019.

The passenger car segment was worst affected and the 22,798 units sold represented a steep 31.2% decline compared to the same month last year despite the car-rental industry contributing a significant 5.7% of car sales last month.

Light commercial vehicles and bakkies at 12,267 units were 8.9% down on the same month last year, while medium trucks and heavy trucks were respectively down 13.9% and 5.8%.

The easing of lockdown restrictions to level 1 during the month contributed to the uptick in business activity and new vehicle demand and drove the further improvement in business conditions in the manufacturing sector, said Naamsa. However, business conditions remain far from normal and the new vehicle market is expected to remain under pressure.

Year to date, the overall new-vehicle market has declined by 33.4% or 132,878 units compared to the corresponding period last year.

An important avenue for the government to support this key coronavirus-hit sector of the economy is to reduce taxes on new-vehicle purchases to stimulate sales, Naamsa said.

“Combined with record low interest rates and low inflation, the automotive industry and the economy in general could hugely benefit should the tax burden on vehicles be reduced during this time.”

Export sales last month declined 20.9% compared to the 36,270 vehicles exported in September 2019, but exports are expected to recover to some extent as major export destinations ease their lockdowns.

Toyota was SA’s best-selling new-vehicle brand last month with 9,435 local sales.

Other brands in the top 15 were Volkswagen (5,458), Ford (3,679), Hyundai (2,623), Nissan (2,612), Suzuki (1,787), Renault (1,651), Mercedes-Benz (1,474), Kia (1,436), Isuzu (1,197), BMW (1,151), Haval (836), Mazda (605), Mahindra (599) and Volvo (413).