South Africa

In South Africa, existing socioeconomic challenges have been exacerbated by the impact of COVID-19, with depressed growth, large fiscal deficits, increasing debt, high unemployment levels, credit rating downgrades by major international credit rating agencies and high social vulnerabilities. South African GDP is forecast¹ to decrease by 11% for 2020, rebounding by 6% off a low base for 2021.

Historically contributing more than 6,4% of South Africa's GDP² (including 2,4% from the retail segment) and accounting for more than 15,5% of total export value, the automotive industry will play an important role in the country's economic recovery.

The South African new vehicle market continues to be affected by the weak macro-economic environment, lack of disposable income and low consumer confidence. Industry margins will continue to underperform as consumers continue to delay purchases, trade down with the shift to cheaper vehicle models and place pressure on the quality of pre-owned vehicle supply.

According to NAAMSA, the South African new vehicle market declined by 18,6% for the 12 months to 30 June 2020³, from 542 411 vehicles down to 441 586 vehicles year-on-year. Motus new vehicle volumes are down 14,3% overall year-on-year, with our Importer brands only down 12,2% year-on-year and Retail and Rental down 20,7%. Despite the contraction in the vehicle market, our market share of the retail vehicle categories in which we operate increased from 18,9% to 20,2%.

New vehicle sales for the 2019 calendar year of 536 626 units compare to projections for calendar 2020 of between 350 000 and 380 000, with growth from this base projected at 420 000 to 440 000 vehicles in calendar year 2021.

United Kingdom

The UK new vehicle market has been negatively impacted by COVID-19 resulting in weak business and consumer confidence, general political and economic instability and further exacerbated by Brexit uncertainty. The market declined by 27% for the 12 months to 30 June 2020.

Australia

The Australian automotive industry remains a highly competitive environment and impacted by COVID-19 resulting in a declining market reflecting the economic challenges, including tightening of lending, foreign exchange volatility, slow wage growth, the effects of extreme environmental disasters including fires and floods and its dependence on the Chinese economy. The market declined by 14% for the 12 months to 30 June 2020, with SUV models continuing to dominate the market.

Competition

• Highly competitive markets are resulting in vehicles, parts and services being sold at lower prices to maintain market share.

Structural realignment

• The trend towards buying down has resulted in significant volume reductions in the luxury vehicle segment and reflects a permanent structural realignment of the new vehicle market and growth in the pre-owned market, entry level vehicles and small SUVs, as consumers continue to trade down due to affordability.

Regulation

• The application of new and emerging regulation, including the Competition Commissions Automotive Aftermarket Advocacy Programme (also known as right-to-repair), remains uncertain.
• Protection of Personal Information Act (POPIA) is the comprehensive data protection legislation enacted in South Africa that aims to give effect to the constitutional right to privacy, while balancing this against competing rights and interests, particularly the right of access to information. It came into force on 1 June 2020, with a one-year period in which to achieve compliance.

Disintermediation

• Two premium brand OEMs have moved towards an agency model. This could lessen dealer network relevance, but this has significantly reduced the working capital required as there is no owned new vehicle stock.
• Financial services providers are expanding their offerings in the vehicle value chain and may broaden relationships with OEMs directly in the future.

COVID-19 crisis

• The inevitable recession and resulting job losses caused by the crisis will exacerbate existing unemployment levels.
• Tightening market liquidity will result in financial institutions reducing motor vehicle funding to qualified buyers.
• Travel restrictions have significantly reduced tourism and demand for rental vehicles, resulting in severe market contraction.
• The pre-owned vehicle market is expected to be quite buoyant.
• Weak currency is impacting pricing.

Mobility as a Service

Consumers are moving from personal vehicle ownership models to mobility solutions that are consumed as a service, on demand, at specified times and places. Mobility fleet operators are likely to continue growing by leveraging their networks to provide more tailored services. Dealership models and vehicle financing could also change, with greater emphasis on offering fewer highly customised products and a shift toward fleet management services.

Digitisation

Consumers are demanding technology that is smarter, simpler and in line with their needs. The automotive industry must transform the customer experience to one that is digital, omnipresent and omni-channel, and reflects the customer experiences enjoyed in the retail, banking and a host of other industries.

Electrification

Interest in electric vehicles is growing as stricter emission regulations, lower battery costs and more widely available charging infrastructure create momentum in their development by OEMs and adoption by consumers. By 2030, electric vehicles could make up close to half of new vehicle sales, with adoption rates being highest in developed urban areas which have strict emission regulations, and slower in rural areas with less charging infrastructure and longer travel distances.

Investment in the infrastructure and resources to support electric vehicles will focus on in developed economies, while developing markets, like South Africa, are likely to experience challenges in funding this shift over the medium term.

Autonomous vehicles

Fully autonomous vehicles are expected to be a reality in the medium term. Current advanced driver-assistance systems will drive regulator and consumer acceptance. Increased connectivity of vehicles with integrated software, remote operations and real-time monitoring will increase the safety of passengers.