The recovery of the motor assembly industry slowed in the 2021 fourth quarter due to Covid-19 disruptions and adverse events that hurt consumer and business confidence.
These events included a three-week strike in the steel and engineering sector, a first interest rate increase in three years, record fuel prices, power shortages, Covid-19 global supply chain disruptions and the new Omicron Covid-19 variant, naamsa/The Automotive Business Council chief executive Mike Mabasa said yesterday in a quarterly report.
However, key industry performance indicators for the full year remained positive for the full year compared with the Covid-19 affected 2020 performance.
And the increase in the new vehicle market was anticipated to continue over the medium term, despite the likelihood of further interest rate increases to curb inflation, forecasts that the economic growth rate will decelerate rapidly this year compared with 2021, and the uncertain environment linked to potential further Covid-19 waves.
A surge in vehicle exports during the first half of 2021 was disrupted by the knock-on effects of the cyberattack on Transnet’s operations during the third quarter of the year, as well as the other adverse events in the fourth quarter.
During 2022, vehicle exports were anticipated to benefit from further new model introductions by major vehicle exporters, as well as increased global demand linked to the favourable economic conditions abroad.
New vehicle sales, which are closely linked to the health of the economy, strongly rebounded year-on-year by 22.2 percent in 2021, in line with the strong recovery in the country’s gross domestic product growth rate of nearly 5 percent when compared to the Covid-19 affected economic contraction of -6.4 percent in 2020.
“The naamsa CEOs are generally upbeat that domestic and global market conditions will support the industry’s key performance indicators over the next six months, although recognising that the pace of recovery is anticipated to slow in line with the much lower economic growth expectations for South Africa in 2022. Despite persistent structural domestic economic challenges, the views of the CEOs express the resilience of the industry to adapt to the constantly changing and uncertain future environment,” he said.
Following a very promising first half when vehicle exports were still on par with pre-Covid-19 record level of 2019, vehicle exports ground to a halt and declined for five out of six months in the second half of 2021. For the full year, vehicle exports, totalling 298 020 units, still reflected a 9.9 percent increase over 2020.
Capital expenditure of R8.8 billion in 2021 was the second-highest annual figure on record. The high levels in capital expenditure were due to investment projects by manufacturers in terms of the Automotive Production Development Programme (APDP), which are normally spread over multiple years and linked to higher levels of production for export markets.
BUSINESS REPORT ONLINE