The car business will be changing
It’s been just over four months since the initial coronavirus outbreak happened in Wuhan, China, followed by their lockdown in a bid to stop the virus migrating to other countries. On 26 March we went into our own lockdown, a proactive response in a bid to halt the spread of the virus in South Africa, which shut down the motoring industry. It’s particularly tormenting the images of empty highways begging to be driven. It’s not the temptation to drive fast on the empty roads that is so tormenting; it’s wanting to drive without mass traffic, aggressive taxis, and e-hailing vehicles holding up traffic in the far right lane.
We know what this virus has done to our economy, and we’re not alone in the economic plunge, oil has for the first time dropped below zero. For car manufacturers in South Africa, it’s a particularly difficult time, Toyota South Africa has lost production of 13 443 units to date. It’s a long path ahead for all sectors of the motoring industry.
The virus has changed all our lives, and it’s most certainly changed the face of the motoring industry for the next few months.
e-Hailing was great, with no responsibility of driving, it made us more responsible, we went out, we partied, we caught an e-cab home. They are used to collect forgotten reading glasses at home, ferry managers between business deals, and as a substitute for everyday transport. When the virus started spreading, e-hailing took an instant hit, the carrying of unknown individuals, with unknown travel histories, became a huge risk factor for spreading and contracting the virus. The risk of sitting in a vehicle that could’ve transported an unknowingly contaminated person from the airport home was too great. Then lockdown happened, and the State Of Emergency transport laws were revealed, and their clamp down on motoring. With minimal e-hailing, it means minimal sales on the Brio, Etios, and Avanza, which affects manufacturer sales.
As the lockdown starts it’s slow, measured lifting of controls we doubt e-hailing will return to previous popularity instantly, it’ll take a few months. There is no control over the state of health of passengers in the car, and unfortunately, you could be carrying the virus and not showing symptoms, an even scarier idea when a car has multiple strangers as passengers daily.
Everyone received a sucker punch when coronavirus hit, on every level, emotionally, mentally, though the worst has been financially. At one point over half the population was in lockdown, jobs have been cut to keep balance sheets precariously balanced, and salaries cut down to prevent job losses. Banks are offering payment holidays on loans, particularly for houses and cars. This has, in turn, has had an impact on motoring in new car sales, lockdown has decimated car sales with zero being recorded for sales across the board. When sales resume dealerships are going to adjusting working hours, Toyota has already announced that weekends and public holidays will be days they trade. The biggest loss of revenue will be to the mid to premium new cars, who needs seat heaters when it’s between high repayments and affordability. The new car sales will be happening in the entry-level market when lockdown lifts, where pricing is affordable, and deals are sweet for those restructuring their lifestyle.
Pre-COVID-19 we were teetering at the start of a recession, as such the pre-loved car market was performing remarkably well. Buyers realised that often the only difference between the latest model and the one before is a slight cosmetic fog light change, and the depreciation had already been paid for by owner one, and spec’d well by them too. Once lockdown lifts the second-hand market will be flooded by those who would rather sell their car than give it back to the bank and be left with nothing. And for those who have sold and can’t afford new, there are going to be great deals to be found.
In the last year, we’d seen a rise in value-added products from manufacturers along the lines of extended service plans and warranties. New car warranties and service plans were being offered with multiple-year/hundreds-of-thousands kilometers coverage from new. Data showed we are keeping new cars on average two to three years longer, as such manufacturers responded in the interest of keeping their business of servicing cars going. Almost all manufacturers offer extended service and warranty plans at reasonable rates, as do select insurance providers. COVID-19 has seen the extension, from some manufacturers, of warranties or service plans set to expire during lockdown.
Not something we think about often, though there is a vast amount of human interaction involved in servicing a car. Servicing of cars will be adjusted to social distancing measures, services can be expected to take a little bit longer as a group can no longer work closely together on a car, it needs to be done in stages. Toyota South Africa has just announced that they’ll be changing their servicing model going forward. They’ll collect vehicles instead of them being dropped off, and they’ll return them, completely sanitised post service. They’re looking into remote servicing where possible too, to prevent unnecessary exposure to the virus. Our new normal is dealerships being open on weekends, and public holidays to service cars.
During lockdown we’ve gotten a glimpse of how beautiful our usually grubby, smog-filled cities are in their ‘natural’ state. We predict a surge in the move towards hybrid and electric cars to bring down emissions and thus smog. This, however, comes with its own set of challenges for countries like ours, where electricity is not clean, for the countries where clean fuel is an option, the future is electric. It’s no longer a question of will we or won’t we adopt hybrid and electric drivetrains, it’s now simply about the timing.
A round of applause needs to go to the South African motoring industry. Car manufacturers have turned their factories into production lines for essential COVID-19 fighting items, like face masks. They’ve also donated the use of their vehicles for the delivery of essential supplies to hospitals and various organisations needing transport during this time. Toyota South Africa has designed a specialised face mask, producing 20 000 a week, once lockdown ends they’ll be handing over production to an SMME to continue the production and supply.
Several things have been made abundantly clear from experiencing lockdown. Pre-coronavirus we were straddling the business techniques learned in the 1970s, that everyone needed to be in an office and be seen by management, while trying to embrace the digital age but being too terrified to do it. COVID-19 has pushed us into the digital age, we have the resources and ability to work, and be profitable, from home. We don’t need to consume as much basic produce from internationally sourced suppliers as we thought we did, we have learned to support local businesses to keep jobs going and the economy rolling. From a motoring perspective we don’t need to drive on pointless errands, gym classes can be done online, and it’s possible to drive to the shops once a week. Save the CO2 emissions for road trips and adventures, for the things that count, for the memories that you wished you were making during lockdown.