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Dr Norman Lamprecht, executive manager of both NAAMSA as well as the Automotive Industry Export Council (AIEC) has released the 2018 edition of the annual Automotive Export Manual publication, on behalf of the AIEC.

Since 1995 and the implementation of the first two motor programmes, South Africa has exported in excess of four million vehicles worldwide and the nominal Rand value of its exports of vehicles and auto components up to 2017, amounts to R1 478 billion, reported Dr Lamprecht.

The automotive industry’s vehicle and component production sector are the largest manufacturing sector in the country’s economy, accounting for 30% of SA’s manufacturing output in 2017. The broader automotive industry’s contribution to the GDP was 6% (4.4% manufacturing and 2.5% retail). Investment is the principle means by which economic policy goals are translated into reality and in this regard the seven major light vehicle OEMS invested a record R8.2 billion, along with a substantial R4 billion by the automotive component manufacturers.

Total automotive industry exports for 2017 amounted to R1 649 billion and comprised a significant 13.9% of South Africa’s total export earnings. A strong Rand exchange rate as well as the time effect of major new model introductions during the fourth quarter of 2017 resulted in the latest results just falling short of the previous export record of R171 billion in 2016.

However, the export value represented the second highest export level on record. Total automotive revenue in the automotive business sphere in South Africa amounted to over R500 billion in 2017.

338 093 Vehicles and a wide range of components were exported to 148 countries last year with Germany remaining our top export market at a value of R46.7 billion. The USA followed at R18.8 billion. The importance of the various trade agreements enjoyed by SA is highlighted by enhanced exports to countries encapsulated in these agreements.

Africa remains a priority focus for the South African automotive industry and automotive exports to 40 countries on the continent amounted to R297 billion of 18% of the country’s total automotive exports of R164 billion in 2017. South Africa, with 601 178 units, accounts for 58.4% of Africa’s total vehicle production. With regard to passenger car production, Morocco at 341 802 units in 2017, for the first time, surpassed South Africa’s passenger car production of 331 311 units.

New vehicle sales in Africa peaked at 1.73 million units in 2014, but subsequently declined to 1.20 billion units in 2017. The motorisation rate at 42% per 1 000 persons, remains the lowest in any region in the world. Considering a population of over 1.2 billion as well as a burgeoning middle-class, there is enormous potential for growing vehicle demand on the continent. South Africa’s automotive exports to the Southern African Development Community (SADC) comprised 86% or R25 billion of its total R29 billion automotive exports to the African continent. Exports of automotive goods to eight of the 15 countries with SADC exceeded the R1 billion level in 2017. SADC operates as a free trade area.

In SADC, the focus is currently on consolidating the achievements of the free trade area, and working to extend African integration through the pursuit of the tripartite free trade area (TFTA) including SADC, the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA), SACU has already exchanged offers with the EAC and Egypt with Ethiopia to follow.

Vehicle and automotive component exports to the three regional economic communities in 2017 amounted to R25 million with respect to SADC, R,92 billion to the EAC; and R9,5 billion to COMESA. The TFTA not only marks an important step in promoting regional integration in Africa, but is also a building block for the African Continent Free Trade Area (AfCTFA).

The independent African Association of Automotive Manufacturers (AAAM) was founded with the strategic view that Africa is extremely important to the future of South African OEM’s and as such SA is playing a mentoring and knowledge sharing role as African countries consider car assembly operations in their industrialisation policies. In this regard regional integration would unlock intra-Africa trade, better customs to co-operation between countries, the elimination of tariff and non-tariff barriers and the improvement of investments on the back of economies of scale. Opportunities relating to the proposed “Cape to Cairo” free trade areas, including 26 African states as well as pursuing partnerships with other countries in Africa interested in vehicle assembly would contribute to the domestic automotive industry’s export performance.

Although South Africa produced 56.4% of Africa’s vehicle production in 2017, the industry remains relatively small in a global context and with production of 601 178 units was ranked 22nd in respect of global vehicle manufacturing with a market share of 0.62%.

Current volatility, logistics costs and international economic developments are challenges the industry has to confront on a daily basis, and which falls outside of the control of the automotive policy programme. South Africa has to compete against major automotive forces such as China, India, Thailand and Mexico amongst others, for investments in new generation models while these countries also export vehicles and automotive components to the world markets.

The import value of vehicle imports increased from R56.2 billion in 2016 to R59.8 billion in 2017, with India being the leading country of origin in volume in terms for passenger and LCV’s. The majority of high-volume entry-level models available in SA are manufactured overseas, mainly in India. However, VW’s Polo Vivo and GM Chevrolet’s Spark are the two exceptions, having been produced locally. Germany leads in the value of imports, which includes the premium brands and was nearly double the value of the imports from India in 2017.

According to Lamprecht, only one or two selected high volume models are manufactured by each manufacturer in South Africa and are linked to export contracts to obtain economies of scale benefits, coupled with imports of low volume models. Every brand has a benchmark product in just about every segment of the market. The domestic model mix is thus arranged to provide the most effective marketing combination of domestically manufactured and imported models to satisfy a consumer-driven market.

With one of the most competitive trading environments in the world, South African consumers were able to select from 3 236 model derivatives from 52 passenger car brands and 699 derivatives from 34 brands in the LCV segment, affording consumers the widest choice to market size ratio anywhere in the world.

Imports of original equipment components used to manufacture the vehicles amounted to R89.6 billion and originated mainly from Germany, Thailand and Japan. Capital intensive and complex components such as engines, gearboxes and electronic interior components are mainly imported, where the relatively low volumes make the projects not economically viable in the domestic market.

However, significant value adding processes take place in South Africa where after the vehicles are subsequently manufactured on behalf of parent companies abroad and exported to global markets. The Rand strengthened in 2017 on a nominal trade weighted basis, resulting in only a modest increase in the automotive import values. The Rand exchange rate, however, has reacted differently to different countries and this is particularly important with regard to the exchange rate of source countries for South African imports. At an individual company level, depending on the particular firm’s exposure to imports and exports and the firm’s balance of trade, the impact of exchange rate fluctuations may also vary.

South Africa’s automotive industry remains a vital element in the country’s economy. The industry plays both a strategic and catalytic role in economic development in view of its significant investments, modern advanced manufacturing activities, its status as a provider or quality employer, contributor to the country’s GDP, earner of forex as well as its significant multiplier effect in the economy.

Long term policy certainty is a key reason for the continuous health and success of the country’s automotive sector. In this regard the role of the Department of Trade and Industry, custodian of the MIDP implemented in 1995, and current APDP implemented in 2013 as well as the SA Automotive Master plan 2021-2025, set to succeed the APDP, is imperative.

The manufacturing sector has been singled out as a crucial drier to place the country’s economy on a path of sustainable growth and development. Considering that vehicle and component manufacturing comprises nearly a third of the country’s manufacturing output, Lamprecht emphasises that the automotive industry is and will remain essential to the growth and success of the South African economy.