South Africa’s retail motor industry is under severe pressure from load-shedding and the country’s high interest rates. This has seen many dealerships close down and could lead to the loss of thousands of jobs.
This is the warning from Motor Industry Staff Association (MISA) spokesperson Sonja Carstens, who told Kaya Biz that several industry roleplayers have had to restructure due to the pressure on the sector.
She said several dealerships and tyre manufacturers have given notice that they have instituted section 189 processes because their businesses are no longer financially viable.
The reason for this boils down to the current lack of demand for cars in South Africa.
“People don’t have the money to buy new vehicles, and even if they want to downscale on vehicles, where they used to, for instance, get around with two cars, then they would sell one and rather just utilize one car per family,” she explained.
In addition, people do not currently have the credit ratings to obtain financing to purchase a car.
Carstens said MISA saw three dealerships close down in Gauteng in the first week of October, followed by at least eleven more in the second week.
There is also a big tyre manufacturer that has pulled out of the country, which will affect 11 retail stores nationwide and 237 employees.
Carstens explained that this is because the companies believe doing business in South Africa is no longer viable. This is due to the country’s electricity crisis, high interest rates, and inflation.
“We’re making it more and more difficult for foreign investors to invest in our country,” she said.
In particular, Carstens said persistent load-shedding is taking its toll, as it indirectly results in higher interest rates and inflation.
“It’s a spiral, and it’s devastating to workers out there,” she said, adding that it has had a ripple effect across the industry.
At the current rate, MISA is concerned that the impact of these factors on the industry could be even bigger than the Covid-19 pandemic.
“And there’s basically nothing we can do about it – there’s no quick fix,” she said. “There’s no solution unless we get load-shedding to stop and unless we get the interest rate to fall.”
“That will be the only way to ease this burden on the economy. And we don’t foresee that in the near future.”
WeBuyCars CEO and co-founder Faan van der Walt also recently spoke about the challenges the industry faces.
Van der Walt said the business “is not as easy as a year or two years ago”. One of the company’s many challenges includes high inflation, which impacts its products’ affordability and demand.
“Affordability is a big challenge for the consumer. Combine that with fuel price increases and load-shedding, and the confidence is quite low,” he said.
“That did have an influence on the vehicle prices and the affordability of clients.”
These factors have led to a decline in the demand for higher-end vehicles and a slowdown in the pace at which they sell.
WeBuyCars-owner Transaction Capital recently said that WeBuyCars’ profits are expected to be 20% down from 2022.