Covid-19-induced lockdowns put the brakes on SA car industry

South Africa’s car industry could suffer even further if the government introduces stricter lockdown measures after exports and new vehicle sales dropped by a almost third in 2020.

Shipments from Africa’s largest auto-making country fell to 271,819 units last year from a record 387,092 units in 2019, data from the National Association of Automobile Manufacturers of South Africa (NAAMSA) showed this week.

Before the pandemic shuttered borders and disrupted supply chains from March, South African car exports were projected to reach a new high of 391,900 units in 2020 and would have partially offset an on-going decline in domestic sales, Bloomberg reported.

Tough months ahead

With the number of infections now over 1 million and more than 30,000 people having died from the disease, some senior government officials assessing the spread of the virus are pushing for the country to move to lockdown level 4 for 30 days from the current level-3 restrictions.

At the height of a nationwide lockdown that shuttered all but essential services for five weeks, monthly exports and domestic sales fell by 97.3% and 98.4% respectively.

Source: National Association of Automobile Manufacturers of South Africa (NAAMSA)

“Tough months are still ahead before business and consumer confidence will be rebuilt,” Naamsa said.

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

The number of new cars sold in 2020 was 29.1% lower than the previous year – levels last seen two decades ago.

10 years of job gains wiped out

Restrictions to curb the spread of the virus erased almost 10 years of job gains, plunging consumer and business confidence to multi-year lows and likely to have resulted in the biggest contraction in the economy in at least nine decades.

The automotive industry, which accounts for 15.5% of South Africa’s export value, is the largest component of the country’s manufacturing sector and employs more than 100,000 skilled workers.

With more that 60% of light vehicles produced for export, much of the sector’s comeback will depend on the recovery of its main trading partners and the pace at which lockdown measures are phased out, Naamsa said.

In 2019, more than a quarter of South Africa’s car shipments went to the UK, followed by Germany and Japan.