The Impact of COVID-19 on the motor retail industry in SA.
We’re about halfway into our lockdown in South Africa. As the dust starts to settle on parked cars at closed dealerships and the reality of economic hardship starts to set in, we see some very worried dealer principals and motor vehicle franchisees.
Motor vehicle dealerships, deemed non-essential businesses by the South African government have had to shut their doors for the duration of the lockdown and have moved into survival mode.
Motor vehicle dealerships have been under pressure for a while now. Net profit margins in this industry are low in comparison to their turnover (around 1.5%-2% of turnover) and, in particular, the luxury segment of the market has been hampered by slow economic growth and rising vehicle prices.
The National Association of Automobile Manufacturers of South Africa (NAAMSA) released sales statistics at the start of April 2020 indicating that vehicle sales were down 29.7% for March 2020 compared to the same period for the previous year (even though Covid-19 only affected apportion of the month). April 2020 sales numbers will be virtually zero and one shudders to think what the May 2020 numbers will look like.