Massive government taxation, such as 42% on cars costing between R200 000 and R900 000 and the tax portion is even higher on luxury models costing more than R900 000, is a major contributor to the inability of the motor industry to grow the domestic market significantly, according to Andrew Kirby, President and CEO of Toyota SA and Chairperson of NAAMSA. He was the keynote speaker at Toyota’s second, annual State of the Motor Industry (SOMI) event, stages at the Kyalami Conference Centre.
The taxes on new cars include VAT at 15% ad valorem excise duty, carbon tax and tyre tax, on which many buyers have to pay interest too as these taxes are included in their finance agreement. This high tax structure makes new vehicle ownership almost impossible for many.
One, common sense proposal to stimulate the local vehicle manufacturing industry, according to research quoted by Kirby, would be for the government, regional authorities, and municipalities to buy vehicles made in South Africa wherever possible. This would not only save valuable foreign exchange but cost the buyers – and therefore taxpayers – less money.
According to Kirby new vehicle sales in SA in 2019 will continue the downward trajectory that began in 2013, with the exception of 2017, when the market registered a marginal increase. In fact, the market has shrunk 15% in the past five years, going down from 649 217 units in 2014 to only 552 190 in 2018.
Kirby gave some interesting insights into the way the makeup of the market has changed in this five-year period, with sales of SUVs and Crossovers increasing by 33%, which was the same as the fall in the C-segment over this period. Another statistic showed massive growth was in the swing to cars with automatic transmission, where the increase has been an astounding 48% as traffic congestion takes its toll. The Toyota CEO says that his company sees the 2019 market at 550 000 units for the year – a decline of 0.4% over the 2018 figure.
Speaking at the very slick and impressive, Toyota-arranged forum Mamello Matikinca-Ngwenya, the Chief Economist at FNB, said this year will “essentially be a year of two halves” with little activity in the first half leading up to the election, “Due to political uncertainty” and then, hopefully, “business confidence will improve, and investment will follow.”
The automotive sector currently contributes 7% to the SA GDP, constitutes 30% of South Africa’s total manufacturing output, and responsible for 14% of exports and employees 112 000 people in the vehicle and component production.
However, these figures pale in comparison to the targets set for the Masterplan, which has a vision of increasing local vehicle production from 0.6% to 1% of global output, which will be well over a million vehicles by 2035, together with doubling the numbers of employees and exports with the added challenge of raising local content from about 38% to 60% if a company wants to maximise benefits from the government’s extended APDP.
The Chairperson of NAAMSA added that there were a number of important focus areas that needed to be addressed in order for the Masterplan to be a success. These included a lack of infrastructure such as stable and competitive ports and rail, as well as the maintenance of roads, while the delay in introducing “clean” fuel was inhibiting the introduction of the latest, more fuel efficient and lower-polluting engines. Technology disruptor’s such as increased electrification of vehicles are other challenges.
However, it was interesting to hear that last year only 66 fully electric cars were sold in SA, compared to a high point of 117 in 2017. Meanwhile if sales of petrol-electric hybrids had also decreased from a high of 646 units to 135 units last year, despite huge hype about these new tech powertrains both locally and internationally.
By Roger Houghton