When looking at the breakdown of new vehicle sales in Africa, the South African market dominates the picture. In the ten years before 2021, just over half of all new Light Vehicle sales in the region were registered in South Africa. That being said, in the 2016-2019 period, sales stagnated at around 500k units a year. And, of course, when COVID-19 struck, the market was only ever going to go one way.
The pandemic has hit South Africa hard, with the existing economic recession being exacerbated by successive nationwide lockdowns. The government only began relaxing the most recent lockdown in late July, underscoring the fact that just 6% of the population has been fully vaccinated. To make matters worse, serious unrest and rioting in KwaZulu-Natal and Gauteng provinces have severely impacted the economic outlook for the remainder of the year.
Vehicle demand and, more specifically, middle-class incomes are closely linked to the strength of the South African economy. Given the current challenges, Light Vehicle sales are unlikely to surpass pre-pandemic levels before 2023. There is, nevertheless, still plenty of scope for growth over the medium term. This is best demonstrated by private vehicle ownership data, with density standing at a modest 170 vehicles per 1,000 adults* – a statistic that has only drifted slowly upwards over the last decade.
Prior to the pandemic, the government had outlined a plan aimed at supercharging the automotive sector, with the aim of alleviating issues like unemployment and low growth by increasing automotive production capacity. If this ambitious project is achieved over the longer term, then South Africa could strengthen its status as the leading automotive hub in Africa, thus, in turn, boosting market demand.
Even by the end of this decade, however, we continue to assume a sub-200 vehicle density as income equality dampens growth potential. Ultimately, such a scenario leaves the door open for other markets in the region to challenge South Africa’s dominance, although it should be said that there are precious few serious contenders at this stage.*By comparison, Eastern Europe’s car density is around 350 cars per 1,000 adults.