Natasha Prince
18 June 2008
Cape Town — Economic pressures, particularly higher interest rates, have been blamed for the closure of many car dealerships across the country.
Two leading car dealerships, Combined Motor Holdings (CMH) and the McCarthy Group, have each closed five of their branches as a result of dwindling sales and some analysts predict that the smaller players in the Western Cape could be next.
Brand Pretorius, chief executive at McCarthy, said selling up was an "absolute last resort".
He said branches in Gauteng and KwaZulu-Natal had been mostly affected.
"Our Cape Town dealerships are still intact," he said.
Pretorius said it was difficult to predict when the market was going to turn and expressed concern on their sales of new passenger vehicles, which plummeted by 28,7 percent in May.
"But we can categorically assure that we are doing everything possible. Multi-franchising and trying to assist with alternative employment opportunities, to prevent the closing of dealerships."
On the McCarthy website, Pretorius said: "Car sales were at their lowest level since December 2004 when 24 580 units were sold. The last time sales for a May month were lower than the 2008 total, occurred in May 2004."
He said they had cut the number of their branches country-wide from 130 to 125.
CMH financial director Stuart Jackson said they too had been forced to close five of their branches, although their Western Cape dealerships had not had not been affected.
He said increasing interest rates was the main contributing factor as people prioritised paying their bonds before buying vehicles.
Cadiz African Harvest economist Adenaan Hardien said the losses among dealerships would be felt country-wide.
"The Western Cape is struggling like any of the other provinces," he said, adding that things had been tough, but it would take some time for many dealerships to get the point where they would "actually close".
"They can usually tolerate the pain for quite some time. But for the second-hand car market, the pain is usually a bit worse," he added.
Nico Vermeulen, director of the National Association of Automobile Manufacturers of South Africa (Naamsa), said the domestic new vehicle market was currently under severe pressure because of the high interest rate environment and the slowdown in the economy.
But, said Vermeulen, vehicle manufacturing plants continued to operate at high levels of capacity due to export demands.
"This also benefits the component producing industry, which supplies components to the vehicle manufacturers for production of motor vehicles for export, in addition to production for the domestic market."
He said the pressure was principally at the retail and distributive side of the industry.
Vermeulen said the decline in sales had been pretty much across the board and that relief for the domestic dealers and distributors was only likely to materialise when interest rates started to move down and the economy started to pick up.
"Naamsa anticipates that this will only happen during the second half of 2009."
Last week the Mail and Guardian reported that about 50 vehicle dealerships across the country had shut up shop since the beginning of the year because of plummeting sales. But on Thursday Vermeulen said he suspected that this number might be higher than 50.
The association said 12 095 fewer vehicles were sold in May compared to the same period last year.
The automotive industry is the country's second-largest industrial employer and contributes 8 percent of the country's GDP.
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