An “extraordinary year” that brought “unprecedented challenges” to South Africa’s economy has seen new-vehicle sales decline by 29.1%, says the National Association of Automobile Manufacturers of South Africa (Naamsa).

This follows a 2.8% drop in sales in 2019.

The South African new-vehicle sales market is now almost 40% smaller than in 2015 – a level last seen 20 years ago.

A Covid-19-hit 2020 saw sales plunge from 536 612 units in 2019, to 380 449 units last year.

A 300-basis point interest rate cut during the year did little to soothe the pain of the global pandemic, as the country had entered a recession before the advent of Covid-19, which meant that middle-class disposable income was already under pressure.

The premium car segment, in particular, experienced significant pressure during 2020, says Naamsa.

The vehicle rental industry, which is a major seasonal contributor to the new-vehicle sales market, also remained dormant, owing to lockdown restrictions on business travel and tourism for most of the year, adds the association.

New passenger-vehicle sales dropped by 30.6% in 2020, to 246 784 units.

Light-commercial-vehicle sales fell by 27.6%, to 110 929 units.

Medium-truck sales declined by 22.5%, to 6736 units.

The sale of heavy trucks and buses declined by 17.2%, to 16 000 vehicles.

New-vehicle exports from South Africa contracted by 29.8% in 2020, to 271 819 units.

This happened as Covid-19 impacted on economic activity in every region of the world, says Naamsa.

Looking ahead, the association says vehicle-export volumes from South Africa are reliant on the performance of global markets, meaning any export gains will be linked to the duration and impact of fresh Covid-19 waves in export markets in 2021.

While there is a general expectation that the South African economy will rebound sharply in 2021, there are still tough months ahead, says Naamsa.

“Prospects for faster economic growth over the medium term are likely to be constrained by new Covid-19 waves, accompanied by stricter lockdown measures, the need for fiscal tightening and persistent power-supply disruptions.”

This means that the new-vehicle market will also face “severe challenges”.

“Although the current low interest rate, coupled with low inflation, could be regarded as a building block to stimulate the economy, a vehicle remains a big-ticket purchase for any household,” notes Naamsa.

“Current market conditions in the passenger car and light-commercial vehicle markets are characterised by a buying-down trend, with sales of pre-owned vehicles being the most enticing option in the current economy.

“The focus for the industry needs to shift to resilience, recovery, and creating strategies to deal with new business and consumer behaviour, says Naamsa.

“The development of tested and proven vaccines and their distribution would transform things for the better, especially for the travel and leisure sector, which

could result in a marked recovery in the vehicle rental industry in 2021.”

Naamsa adds that much of the domestic automotive industry’s recovery will depend on the recovery of its main trading partners and the pace at which lockdown measures are phased out, considering that well over 60% of the country’s vehicle production is exported.

At this stage, Naamsa anticipates a year-on-year improvement of around 15% in domestic new-vehicle sales for 2021.

Vehicle exports could improve by 20%.