Naamsa cautiously optimistic

This was one of the sentiments expressed in the Naamsa CEO Confidence Index, a new in-house leading business confidence indicator of current and future developments in the domestic automotive industry that now forms part of Naamsa’s quarterly review of business conditions in the new motor vehicle manufacturing industry.

“A rebound in domestic as well as global GDP growth rates is generally anticipated for 2021, which bodes well for improved domestic and new-vehicle sales and production, from a very low based Covid-19 affected 2020,” said the quarterly review for the fourth quarter of 2020 released this week.

“In general, the CEOs across all vehicle manufacturing segments, as well as the CEOs of independent vehicle importers, are fairly positive that domestic new-vehicle market performance indicators and market conditions are likely to improve over the next six months,” it added.

The index revealed that 69% of Naamsa CEOs expect domestic new-vehicle sales to increase over the next six months, while 23% expect sales to remain the same and 8% for sales to decline during this period.

However, the review said that despite a much improved performance during the fourth quarter of 2020, the Naamsa CEOs generally regarded the prevailing domestic automotive industry business conditions during the fourth quarter of 2020 as still being unsatisfactory compared to the corresponding quarter of 2019.

CEOs of selected independent vehicle importers also reflected positive sentiment pertaining to their specific brands outperforming the ongoing overall depressed market conditions during the fourth quarter of 2020, it said.

Naamsa CEO, Mikel Mabasa, said the gradual improvement in the vehicle manufacturing sector continued during the fourth quarter, but that business conditions still remained well below the levels of the corresponding quarter in 2019.

“An encouraging sign during the quarter was the increase in sales to the car rental industry in line with the easing of lockdown restrictions for the travel and tourism industry.

“However, considering that the 2020 new-vehicle market recorded its lowest aggregate sales total in 18 years, addressing the Covid-19 risks and overcoming the severe domestic economic downturn remain imperative for the revival of the automotive industry over the medium term,” he said.

Mabasa said the Reserve Bank’s forecast of a domestic economic growth rate of 3.6% for 2021 bodes well for a rebound of the new vehicle market in 2021.

“A full recovery to pre-Covid-19 new vehicle sales levels, however, could take up to three years as the macroeconomic effects of the pandemic will continue to undermine business and consumer confidence and inhibit sustainable economic growth over the medium term,” he said.

Mabasa said total new-vehicle sales declined by 16.9% in the fourth quarter of last year compared to the corresponding quarter in 2019, with total industry new car sales recording a huge 20.4% decline to 76 664 units from the 96 261 new cars sold in the fourth quarter of 2019.

However, Mabasa said the 11.2% increase in total new vehicle sales in the fourth quarter of 2020 compared to the previous quarter was “encouraging”.

Mabasa said this signalled the improvement in particular of the performance of passenger cars, strongly supported by sales to the car rental industry during the quarter in line with the easing of lockdown restrictions for the travel and tourism industry.