Motoring News

‘Green shoots good news for SA’s auto dealers and economy’


“There’s a natural tendency for South Africans to look at the negatives of the nation’s economy under lockdown but, if we look on the brighter side, green shoots are in plain view.” – Mark Dommisse, chairman, National Automobile Dealers’ Association


JOHANNESBURG, South Africa – Cheering words indeed not only for the auto industry but also for those folk looking to buy new vehicles for private and/or business use after six months of  Covid-19 ‘lockdown’.

“First, we’re pleased by South Africa’s handling of the pandemic. Mid-September the seven-day average infection rate was 1627 a day… now it’s fewer than 1000 – a huge difference from the peak of 13 944 a day on July 24.

The result of this decline, Dommisse, added, was a move to Lockdown Level 1 and the re-opening of the travel and tourism markets. ”This positivity is especially important as lockdown risk and stress are economic inhibitors linked directly to purchase decisions and business investments.

MARK DOMMISSE

“One of the most important indicators for the motor industry is record-low interest rates – perhaps  game-changer if the Reserve Bank can maintain current low levels for two years. The auto industry could see very positive results as peoples’ appetite for bigger-ticket items ramps up in the wake of decreased total finance costs.

“This situation is already having a significant effect on certain sectors, particularly residential housing.”

Huizemark Group MD Bryan Biehler has shared interesting information from a recent survey which showed impressive residential sales through the past three months. Levels in some months, he said, were higher than pre-lockdown, an indication of pent-up demand in a buyer’s market.”

NATURAL DECLINE

Demand is particularly strong in the under R2-million segment where mortgage rates are similar to rental costs. The banks are also said to be granting loans of more than R3-million.

Biehler added: “Mortgage bond data showed a natural decline due to lockdown but the same data shows bond values in July and August were up 50% on pre-Covid levels – brilliant news for our economy as the low interest rate has created a favourable investment and buying climate.”

Dommisse reminded that South Africa has low inflation – about two percent until August 28 when the Consumer Price Index jumped to 3.2% year-on-year, mainly due to dearer fuel and municipal tariff increases.

“However, inflation needs to be slightly higher and closer to the Reserve Bank’s band of 3%-6% as it’s a measure of economic strength.

SOARING MINING STOCKS

”It’s important to note that the rand exchange rate is holding up comparatively well after a ratings downgrade to junk and the huge GDP tumble but the rate did not reach the R20 to the US$ earlier predicted by some financial experts.

“More good news is that mining stocks have trebled in earnings before Interest, taxes, depreciation and amortisation, seen as a proxy for cash flow in that business sector. Agriculture is also doing well – lots of rain in important regions and six months’ good sales volumes and prices during lockdown.”

Traffic was increasing in urban areas and on highways.

“This increase is enough to irritate me in traffic on my daily drive, stopping at four dealers on the way, while TomTom has indicated that households are at about 90% of the kilometres travelled pre-Covid.”

South Africa was in the fortunate position of being able to source funds from such as the International Monetary Fund, World Bank, African Development Bank, and New Development Bank – each willing to lend to support rebuilding the economy.

‘I’M A REALIST!’

The Nada chairman added another positive: ”President Ramaphosa survived an important ‘long knives’ meeting of the ANC’s national executive committee and Finance Minister Tito Mboweni’s stoicism and consistent message from Treasury was also welcomed.

“However, I’m a realist who doesn’t look at the world only through rose-tinted spectacles. The biggest shock, psychologically, among other macro-economic factors was a record 51% fall in the gross domestic product (GDP) in the second quarter – but this was expected, and we’ve moved on from there.

“These numbers are dated. There’s been big upticks in the economy – an important one for the motor trade being a jump from selling fewer than 1000 cars in April to about 33 000 a month consistently… pre-owned vehicles are selling strongly.

“Yes, there are still concerns such as rising oil prices, a big budget deficit expected from tax collection, lack of take-up on government bonds, the unreliable power supply from deeply-indebted Eskom, and the impact expected from major international events such as the American election and Brexit but I’m still confident we can weather the storm.

LOOKING AT QUARTERS

“We seem to have quickly forgotten our dire state in during April and I’m sure we are all glad to be in a far more stable trading environment. As chairman of Nada and responsible for several dealers I always look at business in quarters, never months or weeks, so I can see the bigger picture instead of isolated blips.

“I don’t see short-term vehicle sales volumes growing quickly but many of us have taken the opportunity to right-size our businesses. Now we must take advantage of our newfound agility to react to changing conditions – lower interest rates, bank loan approval rates – in fact being generally better than expected.”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s