South Africa: Future Looks Bleak For Motor Retail Franchising Industry

Motor retail industry stalwart Brand Pretorius has painted a bleak picture of the state of the franchising industry and called for constructive partnerships with car manufacturers to keep it alive.

Vehicle sales have plummeted by 50% from 2006 levels, while some smaller franchisers have seen volume losses of 70%, he said.

Over the past 14 months 150 franchise dealers and 200 independent used-vehicle dealers have closed down, which has cost the industry 9500 jobs.

Pretorius said more dealerships would have closed were it not for onerous lease agreements. If a facility wanted to close down and still had obligations in terms of the lease agreement, then the dealer would have to “take the entire lease agreement knock on the nose”, he said.

In 2006 the majority of analysts were forecasting growth through to 2012, with vehicle sales of 1-million a year on the horizon. However, car sales peaked at 714000 in 2006 and the forecast for this year is 385000.

“Instead of experiencing growth we have experienced a severe slump and this is happening against a backdrop of steep cost increases,” Pretorius said.

But he conceded that there was an abundance of reckless lending in the good times. “Momentum was created out in the market and, frankly, we fell for all the good news. Now we’ve woken up.”

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