Vehicle sales crash in lockdown

Jo-Maré Duddy – Only 50 new vehicles in total were sold in April, the lowest monthly figure in about 27 years.

Compared to March – the month before the Covid-19 pandemic forced Namibia into lockdown – 709 less new vehicles were bought. In April 2019, a total of 926 new vehicles pulled out of showrooms in the country.

The latest figures means a drop of 93.4% on a monthly basis and a plummet of 94.6% on an annual basis.

Commenting on April’s stats, Cirrus Securities on Friday said: “This is the lowest monthly sales figure in our time series, which stretches back to January 1994.”

Cirrus’ second lowest monthly slump dates back to September 1994 when 325 units were sold – still nearly 85% higher than in April 2020.

“The dismal new vehicle sales figures were expected seeing as that the Khomas and Erongo regions were on lockdown for the entire month, and the rest of the country was on lockdown for two weeks,” IJG Securities says in its analysis.

New vehicle sales have been brought to “a complete standstill in the last two months”, IJG says.

A mere 9 new passenger vehicles were sold, about 98% less than a year ago. Sales of new light commercial vehicles plummeted by 90.4% to 39 units. Two medium commercial vehicles were sold, a drop of 87.5% compared to April 2019.

Not a single heavy commercial vehicle was sold last month compared to 38 units in April 2019.

Cirrus says this comes as “no surprise given the initial restrictions on most activities that would require such vehicles, like mining and construction”.

Stuck in reverse

“New vehicle sales have been under pressure in recent years as domestic economic conditions have generally been tough,” IJG says.

According to Cirrus, the continuing decline in new vehicle sales echoes the growth in instalment credit. This has remained negative for 32 consecutive months up until March 2020, the analysts say.

The Bank of Namibia (BoN) is yet to release the stats for April.

Simonis Storm (SS) expects a “slow recovery” in new vehicles despite lockdown restrictions being eased.

“Before the outbreak of Covid-19, the economy and household balance sheets were already under pressure and are in dire need of recovery,” SS says.

The analysts add: “Many people are likely to put off a major purchase - after all, a car is the second-most expensive purchase the average person makes in their life after a house. Consumers are likely to keep their money in savings until things get better.”

IJG also believes that new vehicle sales will be higher in the coming months. However, “it is unlikely that it will return to the levels seen in recent months and years,” they warn.

“Both business and consumer confidence are extremely low at the moment as a result of the impact of the lockdowns. It is unlikely that many businesses and consumers will be in a financial position to purchase new vehicles for the rest of the year,” IJG says.

Second-hand market

As the impact of the lockdown and Covid-19 pile on pressure on already strained businesses and consumers, the demand for new vehicles are likely to be replaced for cheaper second-hand vehicles.

“Many employed persons in Namibia have been subjected to either wage reductions or retrenchment due to the diminished business activity, thereby reducing household incomes and the ability to afford (as well as tangible demand) for new vehicles,” Cirrus says.

The supply of second-hand vehicles will add fuel to the new vehicle sales fire.

“With external demand coming to a sudden halt, the tourism industry in Namibia is collapsing. As a result, many operators within the industry (whether offering tours or rental vehicles) have opted to reduce the size of their fleet by selling vehicles, increasing supply in the market for cheaper substitutes to new vehicles,” Cirrus says.

“As the year progresses and general economic activity – both domestically and internationally – remains subdued, more businesses will shut their doors as they are unable to make ends meet. This is particularly true for those in the worst-hit sectors, such as tourism and construction,” the analysts add.

This will result in more commercial vehicles being placed in the second-hand market, and will depress demand for any new vehicles – particularly commercial vehicles, Cirrus says.

“Given the economic hardship 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,” they say.