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The SA Daily 02 July 2020

Lockdown drives down car sales

Shireen Darmalingam

  • SA’s lockdown restrictions were eased on 1 June, allowing vehicle manufacturing plants and dealerships to trade. However, yesterday’s Naamsa vehicle sales for June reflected yet another decline, of 30.7% y/y, after the 68% y/y decline in May and massive fall of 98.4% y/y in April during lockdown which started on 27 March. A total of 31,867 vehicles were sold in June; 12,932 in May, and just 574 in April.
  • Even before the pandemic took hold in SA, due to diminishing wealth effects household spending on durable goods such as cars was already under strain; household wealth had declined steadily over 2019. Household net wealth to disposable income of households fell to 359,5% in Q4:19, from 381.1% in Q4:17. SA’s weak economic activity too kept equity returns at bay. The JSE All Share Index is already down 5.8% so far this year, after gaining just 8.2% in 2019.
  • The outlook for big-ticket items such as vehicles is therefore uninspiring amid the uncertainty about jobs, rising unemployment and SA’s poor economic trajectory.
  • The unemployment rate increased to 30.1% in Q1:20; expectations are for this to have risen further in Q2:20 due to both lockdown restrictions and job layoffs in that quarter.
  • Household consumption expenditure (HCE) too faces rising unemployment; we’d therefore expect HCE to contract by 10.5% in 2020, with a recovery to 6.5% in 2021.

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