Vehicle sales stuck in Covid mud
The ongoing recession, the impact of Covid-19, lost jobs and less disposable income, as well as government putting the brakes on spending will all keep the wheels of vehicle sales from being greased.
Jo-Maré Duddy – New vehicles sold in the first five months in Namibia dropped to the lowest in 16 years and indications are that sales will remain in reverse.
The 470 new vehicles that pulled out of local showrooms last month when lockdown restrictions were eased, are a huge increase from the merely 50 that were sold in April when the Covid-19 pandemic forced the economy into limbo.
However, compared to May 2019, new vehicle sales dropped by 55.5%.
“Excluding April, this is the lowest monthly sales figure since June 2004 which saw 529 vehicles sold in that month,” Cirrus Securities says in its analysis of the latest data.
“The number of new vehicles sold fell to roughly halve of the number sold a year ago or a quarter of what was sold five years ago,” IJG Securities says.
A total of 2 749 new vehicles were sold in the first five months of 2020, a decrease of 36.4% compared to the same period last year.
“Year-to-date sales for 2020 are the lowest observable values since 2004,” Cirrus says.
Commercial sales
Cirrus says the “deteriorated economic outlook does not bode well for commercial vehicle sales, as many businesses will come under pressure”.
“This will lead to increased supply on the second-hand market, and will depress demand for any new vehicles – particularly commercial vehicles – thereby presenting both supply and demand side pressures for commercial vehicle sales,” the analysts say.
According to IJG, the revenues of most businesses in the country will be depressed due to the government imposed lockdowns. As a result these business will not be able to expand or replace their existing vehicle fleets, IJG says.
“The tourism sector continues to be affected by the lockdown of the country’s borders and is currently sitting with an oversupply of vehicles and will thus not be needing new vehicles in the short- to medium term,” they analysts add.
Cirrus agrees: “New vehicle sales will continue to be hindered by the supply of second-hand vehicles from the tourism industry as many participants opt to reduce their fleet size – thereby providing a cheap substitute.”
“Given the economic hardships ahead, and particularly the result on household disposable income, it comes as no surprise that prospective buyers would rather opt for the cheaper second-hand market,” Cirrus says.
Passenger sales
Excluding April 2020 sales, passenger vehicle sales were the lowest observable figure since May 2003 which saw 198 units sold in that month, Cirrus says.
“Weak sales can be attributed to weaker balance sheets of households which are further exacerbated by the increase in cheaper substitutes,” they say.
IJG maintains: “For the most part we expect consumers who haven’t lost their jobs or been forced to take a pay cut, and who can still afford to buy vehicles, to either be more prudent with their finances and defer vehicle purchases or to opt for second-hand models while the current economic uncertainty remains.”
According to Simonis Storm (SS), the increase in new vehicle sales recorded in May compared to a month earlier could be explained by a backlog in April and supply chain disruptions. This is a direct result from the strict lockdown measures introduced by the government in an effort to contain Covid-19, SS adds.
The backlog specifically was confirmed by most dealers during a telephonic survey conducted by SS.
“The survey indicated attempts by dealers to attract potential buyers with current specials to clear old stock and promotions on new units. Dealers also mentioned that local banks are supporting the above endeavour by providing payment holidays, however at stricter approval terms,” SS says.
The analysts continue: “Normally, such incentives, together with current low oil prices (low pump prices), low inflation and low interest rates should be enough to attract buyers. However, this remains to be seen given an already depressed economic environment and the impact of Covid-19.”
Outlook
It believes it “remains unlikely that new vehicle sales will return to the levels seen in recent months and years as economic conditions are expected to remain dire”.
“The fact that the Erongo region was placed under a further lockdown will continue to weigh down on vehicle sales in June,” IJG says.
The analysts add that government too announced that they will not be renewing their vehicle fleet for the next five years.
Cirrus says the continuing decline in new vehicle sales echoes the growth in instalment credit, which has remained negative for 33 consecutive months up until April 2020 - the May data is not yet available.
The 470 new vehicles that pulled out of local showrooms last month when lockdown restrictions were eased, are a huge increase from the merely 50 that were sold in April when the Covid-19 pandemic forced the economy into limbo.
However, compared to May 2019, new vehicle sales dropped by 55.5%.
“Excluding April, this is the lowest monthly sales figure since June 2004 which saw 529 vehicles sold in that month,” Cirrus Securities says in its analysis of the latest data.
“The number of new vehicles sold fell to roughly halve of the number sold a year ago or a quarter of what was sold five years ago,” IJG Securities says.
A total of 2 749 new vehicles were sold in the first five months of 2020, a decrease of 36.4% compared to the same period last year.
“Year-to-date sales for 2020 are the lowest observable values since 2004,” Cirrus says.
Commercial sales
Cirrus says the “deteriorated economic outlook does not bode well for commercial vehicle sales, as many businesses will come under pressure”.
“This will lead to increased supply on the second-hand market, and will depress demand for any new vehicles – particularly commercial vehicles – thereby presenting both supply and demand side pressures for commercial vehicle sales,” the analysts say.
According to IJG, the revenues of most businesses in the country will be depressed due to the government imposed lockdowns. As a result these business will not be able to expand or replace their existing vehicle fleets, IJG says.
“The tourism sector continues to be affected by the lockdown of the country’s borders and is currently sitting with an oversupply of vehicles and will thus not be needing new vehicles in the short- to medium term,” they analysts add.
Cirrus agrees: “New vehicle sales will continue to be hindered by the supply of second-hand vehicles from the tourism industry as many participants opt to reduce their fleet size – thereby providing a cheap substitute.”
“Given the economic hardships ahead, and particularly the result on household disposable income, it comes as no surprise that prospective buyers would rather opt for the cheaper second-hand market,” Cirrus says.
Passenger sales
Excluding April 2020 sales, passenger vehicle sales were the lowest observable figure since May 2003 which saw 198 units sold in that month, Cirrus says.
“Weak sales can be attributed to weaker balance sheets of households which are further exacerbated by the increase in cheaper substitutes,” they say.
IJG maintains: “For the most part we expect consumers who haven’t lost their jobs or been forced to take a pay cut, and who can still afford to buy vehicles, to either be more prudent with their finances and defer vehicle purchases or to opt for second-hand models while the current economic uncertainty remains.”
According to Simonis Storm (SS), the increase in new vehicle sales recorded in May compared to a month earlier could be explained by a backlog in April and supply chain disruptions. This is a direct result from the strict lockdown measures introduced by the government in an effort to contain Covid-19, SS adds.
The backlog specifically was confirmed by most dealers during a telephonic survey conducted by SS.
“The survey indicated attempts by dealers to attract potential buyers with current specials to clear old stock and promotions on new units. Dealers also mentioned that local banks are supporting the above endeavour by providing payment holidays, however at stricter approval terms,” SS says.
The analysts continue: “Normally, such incentives, together with current low oil prices (low pump prices), low inflation and low interest rates should be enough to attract buyers. However, this remains to be seen given an already depressed economic environment and the impact of Covid-19.”
Outlook
It believes it “remains unlikely that new vehicle sales will return to the levels seen in recent months and years as economic conditions are expected to remain dire”.
“The fact that the Erongo region was placed under a further lockdown will continue to weigh down on vehicle sales in June,” IJG says.
The analysts add that government too announced that they will not be renewing their vehicle fleet for the next five years.
Cirrus says the continuing decline in new vehicle sales echoes the growth in instalment credit, which has remained negative for 33 consecutive months up until April 2020 - the May data is not yet available.
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