The worldwide COVID-19 pandemic has had an influence on all industries. What we’re faced with is a new normal of uncertainty, doubt and questions to which there are no answers. Countries across the world had to shut down completely, a first for the history books and a detrimental blow to the world’s economy.
It’s a crisis that has had an impact on local production and our economy, even before the first case was reported in our country.
The South African motor industry is one of the largest manufacturing sectors in the local economy, and it’s an industry that was without a doubt hit hard. Recovery might take longer than we anticipate, if we can recover at all.
According to the National Association of Automobile Manufacturers of South Africa (NAAMSA) the industry presently employs approximately 457 000 people across its various tiers of activity. That’s almost half a million people who rely on one industry to support their livelihood, not to mention the dependents they care for as well.
In its report Impact of COVID-19 On The SA Auto Sector published in April 2020, Deloitte highlights that Moody’s has predicted that global demand for passenger vehicles will shrink by approximately 14% in 2020. This translated into a reduction of over 13.5 million passenger vehicles not being manufactured in 2020.
While the importance of how hard the industry was hit and the effects it will have on it can’t be ignored, the most important element is the industry’s ability to recover and for manufacturers to adapt.
At retail level, retrenchments are realising. With dealerships not being able to trade, many had to retrench members of their sales force. Some may say online vehicle sales is the obvious option, but how will this affect consumers and their traditional buying habits. Will a salesperson who was used to meet potential customers face-to-face with a vehicle to show, adapt to an online showroom where communication is not only vital to the sale, but also probably the most crucial element? Restructuring and training will have to take place to ensure consumers get the customer service they are accustomed to.
With millions of consumers hit, the demand side of vehicle sales will not only drop drastically, but consumers could also decide to downgrade in order to afford their payment instalments. How will this impact the supply side of the industry? Will manufacturers be able to adapt accordingly, and will all the brands survive? Will this be a time for the smaller brands to shine or will they be forced to close shop?
It’s now up to the industry to adapt, grow and move towards a new normal where manufacturing is modelled on what consumers can afford, rather than what they want. This might have a massive impact on premium luxury brands where smaller affordable models were never even considered as an option.
There’s no doubt, the digital future of the car industry is looking more promising than ever. As with all big moves, consumers might be hesitant at first, but just like they got used to wearing masks, working from home and home schooling their kids, they will get used to buying cars online as their first option. Could this mean the end of physical dealerships? Will face-to-face contact only be restricted to servicing a vehicle?
While no one knows what the future holds for the South African motor industry and for how long the effect of the COVID-19 pandemic will be felt, it is clear that online trading of vehicles will grow in popularity and the demand will increase.
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Written by: Wilma van der Westhuizen
Words: 614
Sources: https://www.naamsa.co.za/assets/downloads/Economic_Impact_Of_COVID19_on_theSA_Automotive_Sector.pdf
file:///C:/Users/wilma/Downloads/ZA-Deloitte-Impact-Of-Covid19-On-The-SA-Auto-Sector-April-2020-2.pdf