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The dramatic crash of car sales due to COVID-19 in the first half of 2020 and the subsequent powerful convalescence in the third quarter augurs well for the 2021 industry recovery – that is according to President and CEO of Toyota South Africa Motors (TSAM), Andrew Kirby. However, he warns that the sector must not expect to see pre-COVID sales levels to be attained in the local market anytime soon due to the country’s enduring recession as well as the creeping macro-economic effects of the Coronavirus.
Speaking at Toyota’s fourth instalment of the State of the Motor Industry (SOMI) address, Kirby says the local automotive market will improve significantly in 2021 compared to last year. He predicts that sales will settle at 460 000 for the year but acknowledges that forecasting in such a volatile market is challenging. The forecast translates to an industry sales increase of 79 551 units, or 21%, compared to last year’s retail total. Of the total forecast, Kirby estimated that 285 200 will be passenger, 151 800 will be light commercial vehicles (LCV) while the remaining 23 000 will comprise medium and heavy commercial vehicles.
In the words of TSAM’s Chief Financial Officer Bronwyn Kilpatrick, South Africa was already in recession when it recorded its COVID-19 infections in March, followed by a lockdown, further squeezing businesses and consumers. As a result, unemployment rate struck a record high of 30.8% in the third quarter.
Says Kilpatrick: “We have all heard the negative sentiments surrounding our economy and the many challenges that it faces as it looks towards its recovery path. The key fundamentals of the economy are not well placed due to the structural constraints which exist; coupled with the growing debt of the country and the potential electricity capacity constraints business may be faced with in the future do not bode well for a quick recovery. With the pandemic comes job losses, salary cuts and much uncertainty and this all impacts consumer confidence. This will of course influence the recovery of the economy and in our case the size of the domestic automotive market.
“However, our experience from 2020 has shown us that not all industries are impacted in the same way and that opportunity still exists – we just need to find it. From a Toyota perspective, we have a responsibility to keep moving forward and to create momentum, by engaging positively with our customers whilst continuing to deliver great products.”
Kilpatrick’s sentiments are echoed by Kirby who believes that there is a strong correlation between automotive retail and macroeconomic indicators. “The last time vehicle sales dipped under 400 000 in South Africa was in 2009, with a total of 395 222 units, when we were in recession amid the global financial crisis.
“Just like COVID-19, the Great Recession of 2008 had spurred an economic meltdown that caused business closures, high unemployment, stagnating commerce as well as great uncertainty. While we believe that some lessons learned from the Great Recession can provide some direction to recovery, we also realise that the path may take a very different turn and that the timespan may even be longer.”
Reflecting on last year’s automotive retail, Kirby observed that the passenger market was the hardest hit, down 31% from 2019, while LCV weathered the storm better, declining by 28%. The MCV, HCV/EHV & Bus segments were down 22%, 17% and 22% respectively.
The 30% market decline in 2020 was a huge knock to the local automotive sector, according to Senior Vice President of Sales and Marketing at TSAM, Leon Theron. However, he says he was encouraged by the market recovery in the last quarter of the year. “There were indications, from the fourth quarter 2020, of a revival in the demand for vehicles because of the economic recovery attributed to relaxed lockdown regulations and the improving ease of doing business. That said, we believe industry trading conditions will remain intensely competitive in 2021, with margins under continued pressure.”
Theron also used the opportunity to offer a glimpse of new Toyota and Lexus models expected to launch in South Africa this year. These included hybrid derivatives of Corolla and RAV4, the thrilling GR Supra (power-up), the long-awaited GR Yaris, Urban Cruiser, as well as updated Lexus IS and LS models.
However, the biggest news of the day was the announcement that TSAM will be starting production of a new passenger model in October. “I’m pleased to announce that we will be manufacturing and selling the brand-new Corolla Cross in South Africa at the end of this year. We will be manufacturing Corolla Cross in both right- and left-hand drive…on schedule...for South Africa and the rest of Africa… right here at Prospecton,” announced Kirby.
According to TSAM’s Executive Vice President of Manufacturing and Manufacturing Support Group, Nigel Ward: “The R2.4 billion investment in the Corolla Cross production will result in more than 500 new jobs within Toyota and a further 1 000 in the supply chain. The local sourcing of parts will also boost the economy by over R 2.85 billion per annum.” Ward added that he was particularly proud that TSAM’s planned schedule of the new model was not affected by the pandemic – with production due to commence in eight months.
To ensure that all TSAM operations were also able to mitigate the challenges associated with Coronavirus, the organisation’s Corporate and Human Resources divisions had to devise immediate plans. “We started with the basics - communication,” says Suben Moodley, TSAM’s Senior Vice President of Corporate Services Group. “We immediately recognised that this is a time of uncertainty for many of our employees and their families. So, staying in touch with our employees and hearing from them during the lockdown or while in quarantine was vital to assure and support them.”
On a positive note, the pandemic has made our team stronger as we reflected on our purpose. “We have become more agile and responsive through cross functional teams and flatter structures. This has also made us more flexible and adaptable. Equally important – we have become more open, empathetic, and accommodating. We are now more open to challenging the norm and thinking anew. The pandemic also helped accelerate our digital journey and we have seen higher levels of user adoption of technology,” adds Moodley.