Mission Control on the impact of the COVID-19 Lockdown on the Motor Dealers Market for 2020
At the beginning of the year after vigorous debate and some solid input from Dr Neal Bruton we had a cautiously positive view on new car sales numbers for 2020. The January numbers disappointed and following the old adage, “If you have to forecast, forecast often”, The Mission Control full year forecast was adjusted to 505 714 units; the dealers’ share of this being 408 409 units.
At the time the forecast was predicated on a continuation in 2020 of the low growth environment that the country was experiencing, with authoritative forecasts for GDP growth ranging between 0,6% and 0.9%. We’d be ecstatic to see those numbers now with most commentators now expecting negative growth of at least -6,1% with Treasury recently contemplating -16%. Nobody knew what was coming.
COVID-19, the draconian lockdown and further downgrades have dealt successive body blows to the motor industry and to the motor dealers in particular.
The models used by Dr Bruton takes account of monthly tracking of 24 key market demand drivers that are proven to underpin the market’s trajectory. These have been adjusted to show the impact of the initial lockdown and the subsequent lockdown extension on dealer new car sales.
The chart below reflects the Pre-lockdown view – which would have seen 273 000 new passenger car sales being realised through the dealer organisation, the Initial Lockdown (196 000 cars) and the Extended Lockdown (now only 143 667 cars)
But the motor trade is resilient and we are expecting a quick recovery – albeit not to the previously anticipated levels.
The chart below factors in the effect including estimated Light Commercial Vehicle (bakkie) sales. The impact of the lockdown in its extended format is expected to result in new car Dealer sales volumes around 185 000 units below that originally expected for 2020. This is only 45% of the 2019 volumes.
Volumes this low have not been seen since the Asian Financial Crisis between 1997 and 2000, around that time (in 1998) the prime interest rate in South Africa climbed to 25,5%. The Global (Sub-Prime) Financial crisis in 2008/9 also had a severe impact on Dealer sales – but the impact of the lockdown is expected to significantly higher:
Mission Control is focused providing Leadership, Advice and Support to a variety of enterprises. The firm provides consulting services in Management, Marketing, Strategy Development and Decision Support Systems. After a five-year period as Managing Director of Lightstone Consumer Paul De Vantier established Mission Control – a business focused providing Leadership, Advice and Support. While the experience base and expertise of Mission Control consultants and analysts spans Automotive, Banking, Government, Component and Retail they specialised in the Motor Industry working on various projects from market strategies, feasibilities and forecasting.
Paul De Vantier
paul@missionctrl.co.za
+27 (0) 82 560 0563