Supply constraints drive weak vehicle sales

At the current rate, new vehicle sales are on track to be the weakest for a decade with the exception of 2020.

14 September 2021 | Economics

We believe that once imports and delivery of new vehicles normalizes, vehicles sales will remain flat to negative in Namibia. Theo Klein, Economist: Simonis Storm

PHILLEPUS UUSIKU

A total of 764 new vehicles were sold in August 2021, an increase of 28.8% year-on-year but a decrease of 4.5% month-on-month from the 800 vehicles sold in July 2021. Year-to date (YTD), vehicle sales total 6 447 units, a 35.0% improvement from 2020 but still 8.1% below 2019 levels.

According to Robert McGregor, head of research at Cirrus Capital, although new vehicle sales continue to show an improvement from 2020 levels, this comes off the incredibly weak base set by the pandemic and subsequent restrictions.

At the current rate, new vehicle sales are on track to be the weakest for a decade with the exception of 2020. Demand-side factors have been a key reason for the relatively weak sales, with household incomes remaining under severe pressure for several years, businesses downsizing, and government dramatically slowing new vehicle purchases since 2016, McGregor said.

The year-on-year improvement in new vehicle sales was largely driven by better passenger vehicles, as well as slight improvements in light commercial vehicle (LCV) and extra-heavy commercial vehicle (XHV) sales. Just 11 of the new vehicles were purchased by vehicle rental agencies (all Volkswagens), compared to the 126 vehicles purchased by rental agencies in July 2021, McGregor pointed out.

Expectations

Also commenting on the vehicle sales figures is Simonis Storm’s economist Theo Klein, noting that most local car dealerships reported delays in car imports.

Normally, it took between two to three months for car imports to arrive in Namibia. Nowadays, it takes between five to seven months for imports to arrive.

There are a few factors behind this. Firstly, semiconductors used in the manufacturing of cars, cell-phones and washing machines are in short supply and cannot meet industry demand. Secondly, staff shortages and disruptions caused by Covid-19 cases in manufacturing plants lead to production delays. Lastly, the shortage of cargo ships and containers disrupt the global logistical chain, Klein pointed out.

Expectations from local dealerships are that imports and delivery of new cars in the coming months will remain inconsistent. For example, Toyota has a backlog of about 300 customers who are waiting for their newly purchased vehicles to arrive in Namibia. Due to delivery delays, some brands have mentioned that they have lost customers as they were not able to source the correct vehicles, while some customers switched to alternative brands. Stock shortages in aftermarket spare parts also negatively impact on workshops in Namibia, Klein added.

“We believe that once imports and delivery of new vehicles normalizes, vehicles sales will remain flat to negative in Namibia,” he said.

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