Car Dealerships can finally trade. The Government published a Gazette late last night set out the “specific directions” that car dealerships were eagerly awaiting for regarding car sales during alert Level 4 of the Covid-19 lockdown.

What are car dealerships allowed to do:

  • Car dealers are now allowed to sell both new and used cars.
  • Original equipment manufacturers (OEMs) and importers can wholesale new and used cars.
  • Cars may also be imported and exported.
  • Trade in, car lease schemes and the wholesale trading of used cars are also allowed.

What are the 3 phases to get car dealerships to 100% capacity:

Phase 1 – which commences on 12 May 2020

  • Car Dealerships to operate with up to 30% of staff
  • The majority of car sales must be done remotely. i.e. over the internet or telephone
  • Home deliveries of fully sanitised cars are mandatory
  • Test drives need to be made by appointment only (This requirement exists in all phases)
  • Where possible virtual/electronic signatures need to be used

While the Gazetted document doesn’t outline or stipulate the time period under phase 1, by deduction, the fact that car dealerships go into phase 3 on 8 June 2020 could mean that phase 1 and phase 2 can last a period of up to 2 weeks each.

Phase 2

  • Car Dealerships to operate with up to 60% of staff.
  • Limited customers can enter the dealership under extremely strict hygiene and social distancing conditions.
  • On-site pick-ups and deliveries of fully sanitised cars will be allowed.

Phase 3 – commences 8 June 2020 & continues until lockdown Alert Level 4 is lifted

  • Car Dealerships can operate with their full staff compliment
  • Customers allowed on site but must be kept to a minimum

In all three phases, test drives can only be arranged by appointment while car auctions must be conducted online.

Roadworthy, License and Testing Centres

To support the car dealerships, roadworthy assessment and testing centres will open while the National Regulator for Compulsory Specifications (NRCS) will provide homologation services.

However, licence departments are yet to open and it remains to be seen how car dealerships will drive car sales if ownership can’t be transferred.

There is growing car buying consumer demand

Car buyers have been searching more in the last week than before. This is reflected in a massive increase in online searches. The highest number of car searches in Level 4 period was recorded on 10 May, over 1,3 million searches since the 10th.

Since 4 May 2020 AutoTrader search data shows an increase in leads to car dealerships. Telephone calls have tripled in the past 10 days compared to the lockdown period, in particular. Total enquiries for car sales to dealerships have increased by 69% in the past 2 weeks. 

Searches and demand in the past 24-48 hours have spiked even more as consumers are becoming aware of the fact that car dealerships are open.

Car dealerships can expect car buyers to buy down

Search for cars under R200k has continued with a 300% increase in search for cars under R50k. Car dealerships confirm anecdotally that consumers are “buying down”.

On 29 April 2020, the government announced that restaurants could not open as normal but could “deliver” food to consumers. From that day searches for vans and bakkies have doubled indicating resilient consumers taking opportunities that the current economic climate offers.

South African consumers are still under pressure with 65% of people surveyed indicating that the lockdown has put them under financial strain. 30% of consumers surveyed say they are under pressure to replace their car in the next 4 weeks.

However, car dealerships are still under pressure

Car dealerships are under pressure to survive though. The economic cogs will now begin turning and I believe the vast majority of dealerships will survive, but many will sadly close their doors too. Another particularly important factor in dealership success is the potential decline in consumer finance approval rates. Some dealers are reporting that consumer approval ratings have declined.

The situation is far from ideal. But the good news is that this directive is the best decision for our automotive economy at this time.