The automotive landscape in South Africa has become increasingly saturated with multiple new entries from the Far East, shaking things up for mainstream manufacturers. As a result, the past several months have seen many manufacturers cull their existing dealership network to cut costs and realign with new strategies.
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The winds of change are blowing through South Africa’s dealership landscape. Several automotive brands are quietly trimming their networks or shutting doors entirely as the industry grapples with shifting consumer habits, the rise of online sales and economic headwinds. While the showroom floor was once the beating heart of every car brand’s strategy, the digital era paired with a tight economy means more innovative solutions have come to the fore.
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In terms of this change, Honda South Africa has been one of the more prominent retrenchers. Over the past few years, the Japanese brand has reduced its dealer footprint significantly, although Honda remains operational in SA. Its presence is leaner, with fewer showrooms, particularly in smaller towns. At the moment, Honda still has a sizable 35 dealerships in South Africa, which include the sale of both new and used Honda vehicles, as well as service and parts. In terms of the announced decision, Honda has stated that the brand’s repositioning strategy has seen it shift focus toward crossovers and motorcycles, with less emphasis on passenger sedans and budget hatches.
Moving to the premium segment, BMW, Volvo and Audi have also been trimming their physical footprint. BMW has been gradually reducing its dealership footprint, with the German automaker currently boasting 46 dealerships in the country, a far cry from the 55 back in 2015 (representing a 16% reduction). Volvo is in the same boat but attributes its restructuring to realigning with a new global strategy, centralised around electrification (which inherently requires fewer service centres). The Swedish automaker is planning to reduce its national dealership network from 19 to just seven locations over the coming months (which represents 60% of its current operations). Similarly, Volkswagen Group’s premium Audi division is facing a similar fate and has added that this is courtesy of the shrinking premium market and changes in buyer preferences. Audi has 14 official dealerships in South Africa at the moment.
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Looking back on South Africa’s motor industry, Nissan offshoot Datsun and Chevrolet have ceased operations in South Africa, with the former in 2022 and the latter in 2017. Chevrolet dealerships pivoted to other umbrella brands during this time, including Isuzu and Opel. Speaking of which, the now Stellantis multi-brand franchise model has consolidated with the likes of Peugeot, Fiat and Jeep in the past few years.
More details on why this is happening point towards a more virtual and online retail experience, eliminating the need for physical showrooms. Covid-19 accelerated this digital transformation, and buyers have more access to information and can do research to make informed decisions. While traditional dealerships aren’t likely to disappear overnight, trends suggest less foot traffic and less need for a sprawling dealership network. Another factor is increasing economic pressure and geopolitical insecurities, which include load-shedding, high interest rates, and lower disposable incomes for buyers. A prominent theme with mainstream manufacturers is the need to realign global strategies, which requires cutting underperforming models or brands, and focusing on electrification and high-growth segments. Smaller or legacy brands sometimes get left behind.
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The question of what may happen to these vacant premises is likely floating in the minds of many now. According to the National Automobile Dealer’s Association (NADA), certain locations may pivot into used vehicle lots, but others have transitioned into the welcoming entrances for brands of the Far East, including Chery, GWM, Haval, Jetour, Omoda and Suzuki, all of which offer value for money to the cash-strapped South African buyer.
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