Car dealers plead: let us open our doors
When lockdown restrictions are eased, car dealerships should be among the first businesses to start work to help get the economy’s wheels turning.
The motor industry plays a critical role in getting people, products and services to market, says the National Automobile Dealers’ Association (Nada), which represents about 85% of new franchise dealerships in SA.
With the national lockdown having brought the economy to a near-standstill, Nada's call added to mounting pressure on the government to at least partially reopen the economy to prevent mass job losses and company closures.
SA's automotive industry might have to lay off up to 30% of its workforce because of the Covid-19 lockdown, according to an industry-wide survey by the National Association of Automobile Manufacturers of SA (Naamsa).
The survey, compiled by Naamsa CEO Mike Mabasa, covers the entire automotive industry which employs 468,000 people.
The government is reportedly getting ready to ease the national lockdown with a multi-stage alert system that links economic activity to the severity of Covid-19 transmission, to be elaborated on by President Cyril Ramaphosa on Thursday evening.
While Nada agrees with this risk-adjusted and phased approach to unlocking economic activity, it urges government to consider the automotive retailers as a key component in getting all sectors operational, says Mark Dommisse, national chairperson of Nada.
“In order for the economy to function efficiently, it relies on various forms of crucial mobility services, including the repair and maintenance of private and public transport, parts availability, and new vehicle supply,” says Dommisse.
When vehicle factories resume operations they will require channels in which to distribute the products they assemble, he says. “Limiting demand to export only is unnecessarily prejudicial to the factories ... interrupted supply into the local market will cause lost sales, which inevitably will lead to lost jobs.”
Jebb McIntosh, CEO of Combined Motor Holdings, said every day the lockdown continues means an increase in the number of dealers that may never again open their doors, and a greater number of retrenchments at dealerships that do open.
There are about 1,600 franchise dealers in SA employing 60,000 people directly, and nearly one million in the automotive value chain with the multiplier effect. Franchise dealers’ collective investment is worth more than R40bn, Nada says, which accounts for 2.5% of the motor industry’s 6.9% contribution to GDP.
“Our high tax base is a strong contributor to the fiscus and we will help kick-start other industries, including the OEMs, parts manufacturers, vehicle asset financing, other financial services and the workshops,” says Osman Arbee, CEO of Motus, an automotive group which distributes the Hyundai, Kia, Renault and Mitsubishi brands.
“We also have a vital role to play in supporting the mobility needs of any other business or industry that is allowed to recommence trading. Simply put; we represent a low risk and high return opportunity,” says Arbee.
Nada says that from a safety perspective, dealerships can adapt quite quickly to ensure that their environments are as safe as possible. Dealerships generally have low footfall and spacious facilities, ensuring effective social distancing. Appointment scheduling and access control measures, which were largely in place before the crisis, can ensure that the number of people within facilities at any given time is monitored and controlled.
“It is crucial that the dealer retail market swings into gear as soon as possible,” says Ghana Msibi, head of WesBank’s Motor division. “Dealers are a critical enabler in the automotive value chain, and with current technologies the financial industry can be largely digitised. We can execute almost all aspects of finance and insurance processes online, and can nearly completely eliminate the need for consumers to enter dealerships before the final delivery of vehicles.
“WesBank predicts that social distancing will be part of our lives for quite some time to come and expects more people will be leaning towards safer means of transportation in efforts to avoid being exposed to contagious illnesses,” Msibi continued.
Brynn Stephenson, CEO of Unitrans Automotive Group says: “We have 6,000 staff members at Unitrans, with the majority earning a significant portion of their salaries on commission-based structures. Earning a basic salary, if paid without any commission, is in no way a sufficient income. With no turnover in our dealerships, cash reserves will soon be depleted, resulting in the frightening prospect of a complete business restructure.”
The lockdown has brought the SA motor industry to a standstill, with new-vehicle sales halted and the industry's major export markets also shut down.
Earlier this month the Retail Motor Industry (RMI) organisation appealed to government for funding to help keep the automotive aftermarket industry’s wheels turning post-lockdown.
About 80% of tyre, parts and accessory retailers, and repair and servicing outlets, are small to medium-sized businesses, said Jakkie Olivier, CEO of the RMI.
“In the current economic slowdown, these are the businesses that have the greatest potential to generate employment post lockdown,” he said.
He said he supported the need to safeguard the health of South Africans but appealed to government to recognise the critical role the automotive aftermarket industry is playing in keeping the economy ticking.