More than 50 vehicle dealerships across the country have shut up shop since the beginning of the year because of plunging sales, according to industry sources.
Up to 1 500 jobs have already been lost in the trade and major groups are contemplating further retrenchments.
Under the combined pressure of rising interest rates, a 10,4% official inflation rate, rocketing fuel prices and new credit legislation, vehicle sales fell 23,4% in May, the biggest decline in nine years.
The National Association of Automobile Manufacturers of South Africa (Naamsa) said 12 095 fewer vehicles were sold last month than in May last year.
Two major motor dealerships, Combined Motor Holdings (CMH) and the McCarthy Group, told the Mail & Guardian this week they have each closed five of their branches in response to declining sales.
The automotive industry is the country’s second-largest industrial employer and contributes 8% of the country’s gross domestic product.
Brand Pretorius, chief executive at McCarthy, said the viability of many of the group’s branches, such as that of other motor dealerships across the country, were under threat.
On the McCarthy website Pretorius warned that with further interest rate hikes “sales are likely to decline even further, which will make job losses in the motor industry inevitable”.
The “very challenging times” required “focused action plans aimed at protecting the viability of our businesses and the livelihood of our employees”, he said.
Pretorius told the M&G that the company will cut other expenses before resorting to retrenchments.
He declined to reveal how many jobs had been lost at McCarthy, but estimated industry job cuts to date at 1 500.
Pretorius said McCarthy expected a substantial decline in profits when the company announces its results in August.
CMH financial director Stuart Johnson said the company had closed five of its branches and slashed stock orders by 40%.
Last year CMH recorded a 22% profit drop to R103,6-million. Headline earnings dipped by 34% to R53,6-million and the car hire unit’s profit by 47%.
Auto manufacturers contacted this week said they had not yet scaled down their operations or cut jobs. But Naamsa said that retrenchments would be inevitable if conditions worsened.
The National Union of Metalworkers said it would resist further retrenchments in the auto industry.
The union is engaging auto industry employers on how to manage the slow-down in vehicle sales.