There has been an intense decline in the purchasing of new and used cars being financed in Q1 of this year. We all know that the decline in sales has been caused by the same thing affecting most industries in a negative way…COVID-19. There has been a decline in sales of 35% for new vehicles and 31% of secondhand vehicles sold compared to the same time last year.
New car sales have decreased by 98.2% in April due to the nationwide lockdown in South Africa. According to the National Association of Automobile of South Africa (Naamsa) only 574 cars have been sold compared to 36 787 vehicles sold the same time last year.
TransUnion SA Vehicle Pricing (VPI) is forecasting that the rest of the year will be tough for the automobile industry. The vice president of Auto Information solutions for TransUnion Africa stated Kriben Reddy said the following: “Q1 VPI report painted a gloomy picture for the automotive industry for 2020.”
South Africa was already at the beginning of a recession when COVID-19 hit our shores as our economy started taking a knock at the end of 2019. The automobile industry’s sales were already predicted to decline 3 to 5% but the current decline could not have been predicted.
“Consumers are currently uncertain on what the future holds through the current lockdown, with unemployment rate increases, negative exchange rate impact, negative annualised GDP growth rate, and Moody’s and Fitch’s rating downgrade all putting pressure on disposable income.”
“The positive indicators of petrol price decreases, the interest rate drops, below-inflation vehicle price increases, dealer incentives and low inflation could not move consumers into new vehicle purchases in Q1.”
How will the car industry change?
South African consumers have been negatively affected by Covid-19. With lower consumer confidence and a negative impact on consumers’ disposable incomes, South Africans aren’t making big purchases. We will see mostly used cars being bought in 2020. For every new vehicle that has been financed, 2.13 used cars are financed. To read more about what this means for the car industry, read here.
