Automobile  industry needs strong government support to increase car sales

“South Africa welcomes continued slow improvement in new car sales and a declining stalemate, but the auto industry needs strong government support to increase sales and thereby increase tax payments to states,” said Mark Dommisse, chairperson of the National Automobile Dealers’ Association.

His comments came after the South African National Association of Automobile Manufacturers (Naamsa) published information about the retail sales of new vehicles.

Total new vehicle sales in South Africa rose 12% in September from 37,403 units, compared to August’s 33,515 units, but still reflects a 23.9% decline from the 49,140 vehicles sold in September 2019.

“Approximately 33,080 units, or 88.4% of the total, were dealer channel sales, compared to 30,875 units, or 92% of the total, in August. However, the good news, September dealer sales were only 11 years ago compared to September., 6% decreased, which indicates a convincing consumer demand in a market that has more than halved this amount, “added Dommisse.

The auto market was hit the hardest with a 31.2% monthly decline, although rental companies had a 5.7% share. Light commercial is growing well and is only 8.9% below the light truck market in August 2019. The light truck segment is supported by 1,217 units sold to the government, representing 31.3% of the volume increase in the segment in September compared to August. In fact, without these government sales, the LCV market would have shrunk by 17.9%.

“Government spending is growing significantly and supporting the market. Revenue through government channels accounts for 5% of total sales. Leases represent 3.7% of the total, while 2.9% are bought by industrial companies. The rental portion is still low, but at least better from August which is important because rental companies are an important source of vehicles for the used car market, ”explained Dommisse.

Heavier commercial vehicles also fared much better than the passenger car market: Medium-sized trucks fell 13.9% to 680 units, while heavier trucks and buses grew only 5.8% higher, to 1,658 units, lower than same month last year.

Exports, which are especially important for the survival of the local industry, did much better in September than in August, which fell 40% monthly. In September, 28,704 vehicles were exported only 20.9% below the value of the 36,270 vehicles shipped a year ago.

“While grateful for the continued increase in retail sales, after nine months we are still 33.4% below 2019 compared to this year. So far the industry has sold 265,412 retailers compared to 398,290 retailers. Units were sold between January and September 2019.

“Industry needs strong incentives to recover from the crippling effects of the COVID-19 pandemic. Here we wholeheartedly support Naamsa’s recent call for the government to cut taxes on new vehicles,” said Dommisse.

“Motorists pay more than a reasonable share of tax. 42% or about R 189,000 of the retail price of the R 450,000 car goes to the Ministry of Finance. Naamsa wants that figure to be reduced to 35-38% by adding it to purchases. Eliminate carbon tax paid and lower taxes ad valorem, which is based on the value of goods that are considered luxury in South Africa. Vehicles are certainly a necessity in a country that does not have an efficient public transport system. A tax cut will not only increase sales, but also create more jobs and generate income addition to the tax system with more sales.”

He said the association also supported Naamsa’s latest initiative to demand tighter controls on so-called gray imports to South Africa. These are used vehicles intended for handling in a neighboring country and are likely to be sold.

However, said Dommisse, Naamsa estimates that around 30,000 people remain in South Africa each year, which has a significant impact on local vehicle sales.

“We need to unite at times like these as we are working hard to contribute to the recovery of the South African economy,” added Dommisse.

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