South Africa’s automotive sector among hardest hit by COVID-19 lockdown

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South Africa’s automotive sector is among those hardest-hit by the country’s COVID-19 lockdown. The Eastern Cape is the hub of car manufacturing in the country. The five-week production halt during the hard lockdown had a major impact on business and the economy of the Nelson Mandela Bay Metro (NMB) – home to some of the biggest car manufacturers.
Normally busy production lines stood still for weeks on end in Port Elizabeth. Something no one in this industry had ever experienced, according to CEO of Isuzu South Africa, Billy Tom. He says this was a year like no other.

“We couldn’t sell a product and the revenue line came to a standstill. We did not generate any revenue during that period but there were people working from home, those not involved in production those that do the office work. So they were doing work behind the scenes but from a sales point of view it meant we weren’t generating any funds which is something unheard of in the history of our business.”

Impact of COVID-19 on the automotive sector:

Before the pandemic, businesses in this metro were already struggling due to political instability and an unstable economic environment. The introduction of the lockdown and subsequent economic restrictions and regulations have highlighted the complex nature of issues businesses face.

President of the Business Chamber, Andrew Muir, says the Nelson Mandela Bay Metro is in a deep hole.
“Right now it’s bad. I think we are in the worst state we have been in as a business community in Nelson Mandela Bay since 1994. As a region, we rely heavily on tourism that has been hugely impacted by COVID. Our other major industry is the automobile industry and that has been affected too in various different ways. The supply chains have been affected.”

The lockdown affected four key performance indicators in the automotive sector: namely production, sales, imports and exports. All these indicators slowed down this year to meet the slow demand and standstill of business. The ports reopened their import and export commodities in April solely to decongest the logistic supply chain, specifically the ports and vessels ready to offload critical components. Port Manager at Port Elizabeth, Rajesh Dana, says the underperformance of exports and imports was expected.

“Throughout lockdown, we have seen reduced volumes, significantly reduced volumes. Both on the imports and exports of automotive units we’ve seen an underperformance of approximately 40% and we envisage that it will continue for the remainder of the year. We envisage the full recovery of the automotive sector in two to three years time reaching back to our original pre-COVID volumes.”

Sixty-four percent of all manufactured cars in South Africa are exported.

CEO of Naamsa, Michael Mbasa, says that the fact that vehicles are produced on a demand basis, means the numbers have dropped significantly.

“We’ve seen a huge global decline for new vehicles. We’ve also seen a huge decline globally because South Africans are going through a recession and a lot of people are not able to buy new vehicles because of the current economic climate. And that has obviously had a huge impact on the demand for vehicles in South Africa.”

Industry leaders hope to return to their original production volumes by 2023.

The automotive industry contributes 6.9% to the country’s GDP and is the largest manufacturing sector in the economy. It is responsible for approximately 450 000 jobs across the formal sector.

GDP in Q3 stronger than market expectations:

 

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