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By: Kelvin Chiringa 

With the importation of vehicles forecast to be challenging this year due to global production challenges, economists at Simonis Storm have warned that prices for second-hand cars will likely be relatively high.

 The high price trajectory will likely come about due to constrained supply, increased costs being passed through by auto manufacturers and a weaker Rand exchange rate, said the firm. 

The brokerage firm said that instalment credit extension from commercial banks is another constraint on local vehicle sales as local dealers have alluded to losing numerous deals due to customers not obtaining financing from banks. 

“This is evidenced by instalment and leasing credit contracting by -4.6% y/y and -0.3% y/y for businesses and households in 2021. However, demand from local customers will remain supportive of seeing similar to higher vehicle sales in 2022 compared with 2021, as we know that local demand exceeds supply from our discussions with various local dealerships. 

“Customers who could not source their desired car in 2021 will likely attempt to do so in 2022, despite an expected rise in interest rates (especially for higher-end brands which typically have higher income customers). Consumers will likely face less availability in the second-hand market during the first half of 2022. We are seeing fewer trade-ins taking place in Namibia, and local dealers continue to struggle in second-hand sourcing units from South Africa,” said Simonis Storm’s Theo Klein. 

The firm has reported that 734 vehicles were sold during December 2021 (compared to 755 sold in the prior month and 704 sold a year ago), according to the National Association of Automobile Manufacturers South Africa (NAAMSA). 

Vehicle sales increased by 4.3% y/y and decreased by 2.8% m/m in December 2021. 

Medium-commercial vehicles saw the most significant annual increase. However, total vehicle sales continue to dominate passenger (49% of total sales) and light-commercial vehicles (43% of total sales). 

In 2021, 9,428 vehicles were sold (compared to 7,612 sold in 2020 and 10,415 in 2019), representing a 23.9% annual increase. 

In the pre-pandemic outbreak, 1,196 vehicles were sold monthly compared to 705 cars on an average post-pandemic outbreak.

Removing the base effect of April 2021, the average annual increase in vehicle sales stood at 17% for 2021.

 Toyota and VW Dominate Market

Simonis Storm has said some of the brands with the highest annual increases in sales in 2021 compared to 2020 (coming off a low base) include Suzuki (95%), Scania trucks (77%), KIA (66%), Lexus (44%) and Land Rover (35%). 

In terms of market share, Toyota and Volkswagen continued to dominate the local market and accounted for 34.9% and 13.7% of total vehicles sold in 2021, respectively. 

Comparing market shares of annual sales, Nissan replaced Ford as the third largest brand with 6.2% of total sales in 2021, and Ford moved down to the fourth largest (6.1%). 

Lastly, KIA replaced Mercedes as the fifth-largest brand, with 4.6% of total sales in 2021. These top five brands accounted for 65.7% of total vehicles sold in 2021.

Motor car prices have, on average, increased by 8.8% y/y in 2021 compared to 2020, with average spare part prices have increased by 6.4% y/y in 2021 and service and repair charges increasing by 4.6% y/y in 2021.

“Some argue that it is unlikely for the global chip shortage to be resolved anytime soon, given the complexity of the chip manufacturing process used to create increasingly sophisticated chips needed in vehicle design, according to Aranca (a global research firm). Also, the lead times (time from order to delivery) for chip production can go beyond four months for products already well established on assembly lines. 

“Switching to different manufacturing sites to increase production capacity usually adds a delay of about six months. Given these issues, automakers are trying to sign agreements with global foundries to ensure chip supplies. 

“Some believe that the supply constraints will ease from mid-2022 onwards due to increased capacity being put in place by the Taiwanese Semiconductor Manufacturing Company (TSMC) who plans to build a new plant in the South of Taiwan, Samsung intends on building a new plant in Texas and Intel looking at constructing two new plants in Arizona amongst other projects,” said the firm.

 However, Covid variant infections amongst plant workers and lockdown rules remain a risk to production in 2022. 

Another risk remains that automakers are not the biggest buyers of chips, so chips are sold to alternative high selling devices such as smartphones, servers, and high-performance computing.

 The global automotive industry accounts for about 10% of global semiconductor sales. 

Kelvin Chiringa

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