As Namibia’s peak tourism season approaches, car hire companies continue grappling with challenges of sourcing new vehicles to rebuild their fleets in response to the rising demand in self-drives.
According to Simonis Storm, local rental companies had a fleet of 8 500 vehicles before the Covid-19 pandemic broke out ,but these have dropped to about 2 000 units.
“Rental companies typically increase the sizes of their fleets during the peak tourist season between May and July each year,” Simonis Storm Economist Theo Klein said.
However, May 2022 data from the National Association of Automobile Manufacturers of South Africa shows an exception to this trend.
“New vehicle sales for May 2022 slowed from a spike in sales seen in the prior month to below its six-month moving average 767 units sold in May, compared to 905 in the prior month,” said Klein.
This represents a drop of 15.2% m/m and the 790 sold in May 2021 represent a drop of 2.9% y/y.
Passenger and light commercial vehicles continue to be the bulk of new vehicle sales, accounting for 52.4% and 40.3% of total sales respectively in May 2022.
On an annual basis, passenger vehicle sales increased by 12.3% y/y, light commercial vehicles dropped 16.7% y/y, medium commercial vehicles sales dropped 40.0% y/y, with heavy commercial vehicles down 33.3% y/y although extra-heavy commercial rose 3.0% y/y in May 2022.
“New vehicle sales have averaged 863 units per month YTD, which is above the monthly averages of 810 and 550 in recorded in the same period during 2021 and 2020 respectively. The YTD monthly average is very close to the pre-pandemic monthly average of 869 recorded in 2019,” observed Klein.
Instalment and leasing credit growth has been sluggish among households, averaging growth of 1.2% YTD and 0.9% in the last 12-months. This is indicative of a number of local dealerships who point out that there are numerous declines in vehicle loans among their clients from local banks.
As a result, the proportion of cash sales have increased compared to credit sales.
On the other hand, instalment and leasing credit among corporates has increased by double digits in March and April 2022 and averages monthly growth of 9.2% YTD and 1.4% in the last 12-months.
Global passenger car production remains far below pre-pandemic levels and while some auto manufacturers are concerned about future consumer demand amid rising inflation and interest rates, German carmakers are confident that they can pass on rising raw material costs on to consumers, according to an Ifo Institute for Economic Research survey.
A new shortage has been looming globally in wire harnesses which are a cheap component that bundles cables together. Ukraine is a significant provider of this low tech, low margin component which is made from wire, plastic and rubber using low-cost manual labour. While wire harnesses do not receive as much media attention such as chips, cars cannot be built without it.
As other auto firms have shifted harness production away from Ukraine to other low-cost countries, if Namibia had favourable ease of doing business scores, a lack of policy uncertainty and a pro-business environment for foreign auto firms, this could have been an opportunity for the country to produce the required wire harnesses which in turn could have made use of abundant unskilled labour in the country, said Simonis.
