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Thought Leadership: New era for Eastern Cape auto industry

Thought Leadership: New era for Eastern Cape auto industry

The US company, whose vehicles have been built in SA since 1926, said it was selling its Struandale vehicle assembly plant in Port Elizabeth to Japanese commercial vehicle company Isuzu, said David Furlonger of the Business Day.

The decision by Japanese auto assembler Isuzu to buy the assembly plant and invest in the Nelson Mandela Bay metro is part of a trend in which companies from the east are increasing their presence in Africa, while western trading partners appears to be holding back, says Dr Ayanda Vilakazi, Head of Marketing and Communications at the Coega Development Corporation.

He was responding to concerns over a decision by Isuzu to purchase the General Motors plant in Port Elizabeth and to take full control of its South African operations, in which the American company had a 30% stake.

Data released by FDI Markets recently showed a similar tendency, in that two of the biggest investors in value terms in Africa during 2016 were China at R531 billion and Japan at R45.6 billion. Japan was third to the United African Emirates. Investment by United States companies dropped by 5.2% over the same period, to around R53 billion.

“In Nelson Mandela Bay we see the same pattern – the biggest investor in the South African motor industry for over 40 years is Chinese company BAIC, which is building a new R11 billion plant opposite another Chinese auto company FAW, which invested R1,1 billion (Phase 1 & 2) – both at the Coega Development Corporation. Then we have Isuzu committing fully to South Africa and Nelson Mandela Bay rather than having to rely on a second party to represent the brand.

“With the General Motors warehouse in the Coega IDZ being taken over by Isuzu we at the CDC are awaiting with bated breath to see what the re-energized Japanese company will do in South Africa and on the rest of the continent,” he says.

Dr Vilakazi adds that the news that Isuzu is replacing General Motors as one of the original equipment manufacturers (OEMs) based in the Eastern Cape has overshadowed another positive development – that of the introduction of new models for the local and export markets by both Volkswagen and Mercedes Benz South Africa (MBSA).

Volkswagen has invested R4.5 billion to increase the capacity of its plant from 120 000 vehicles a year to 180 000 as part of its preparation for the next generation of Polo, which is due to be available from August this year.

“We see the benefits of this investment being reflected in the Nelson Mandela Bay Logistics Park, which is managed by the CDC. Component suppliers for the new model are all gearing up and have also been investing in their plants to meet the demand,” he says.

Another new range from the Eastern Cape is the Mercedes-Benz AMG derivatives, which will start rolling off the production line in the second half of the year. MBSA has announced that it is investing R200 million in new equipment to produce the models.

“As a province we can hold our heads up as we are home to three award-winning motor companies,” says Vilakazi, referring to the announcement made in June last year that Volkswagen South Africa had been rated as the top VW plant in the world. FAW also received the group’s award for Best Distributor 2016. MBSA received a JD Power award as the second-best manufacturing plant in Europe, Africa and America in terms of manufacturing quality for a number of years in a row.

“Such accomplishments do not happen in isolation. They are a tribute to the people who build the cars and those who produce the components that go into them, as well all those who provide other support services such as logistics. We are confident that the Eastern Cape motor sector will continue to power forward, and make a lasting contribution to the continent’s motor industry as a whole,” concludes Vilakazi.