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Quarterly review of business conditions: new vehicle manufacturing industry / Automotive sector: quarter ended 31st March, 2018

Quarterly review of business conditions: new vehicle manufacturing industry / Automotive sector: quarter ended 31st March, 2018

NAAMSA submits the following report on business conditions in the South African new motor vehicle manufacturing Industry and the automotive sector during the first quarter of 2018.

1.   EMPLOYMENT LEVELS AND TRENDS

The number of persons employed by the South African new vehicle manufacturing industry – comprising the major new vehicle manufacturers and specialist commercial vehicle and bus manufacturers – during the first quarter of 2018 may be set out as follows –

    Industry Total  
Last pay week   January, 2018 29 753
Last pay week   February, 2018 29 752
Last pay week   March, 2018 30 032

Industry employment levels and trends reflect employees on the payroll of vehicle manufacturers.

Aggregate Industry employment as at 31st March, 2018 totalled 30 032 reflecting an increase of 224 jobs or a gain of 0.75% compared to the 29 808 Industry head count as at the end of December, 2017.

The average monthly industry employment number for 2017 was 30 050.

2.   NUMBER OF SHIFTS

Various manufacturers operate on a three shift basis as well as multi shifts in selected areas such as machining, press shops, paint shop operations and body shop.

Three manufacturers operate on a three shift basis. Four manufacturers operate double shifts in specific areas.

3.   AVAILABILITY AND PRICE TRENDS OF COMPONENTS AND RAW MATERIALS

3.1       COMPONENTS

Imported Components

The availability and supply of imported components remained stable during the quarter. Prices of imported components were affected by exchange rate movements during the first quarter with the Rand strengthening and this eased Rand based component prices.

Local Components

During the first quarter of 2018, the availability and supply of locally produced components, in general terms, remained stable.

First quarter component pricing generally in line with expectations and in line with producer price inflation. 

3.2       RAW MATERIALS

Imported Materials

The availability of imported raw materials, where applicable, remained stable.

Pricing trends remain a function of exchange rate movements. Imported raw material price increases were reported in respect of lead and aluminium. These were offset to some extent by exchange rate strength.

Local Materials

Supply and availability remained stable.

4.         UTILISATION OF PRODUCTION CAPACITY: 2011 – 2017 AND FIRST QUARTER, 2018

Average motor vehicle assembly Industry capacity utilisation levels, by sector and for the years/quarters indicated, may be illustrated as follows –

 

Year

2012

Year

2013

Year

2014

Year

2015

Year

2016

Year 2017

1st

Quarter

2018

1st  Quarter 2018

Range                                                      (High)         (Low)

Cars 86.5% 68.0% 67.0% 80.4% 76.0% 78.0% 74.4% 100.0% 25.0%
Light Commercials 87.8% 75.3% 80.5% 80.6% 77.9% 85.3% 74.1% 100.0% 24.2%
Medium Commercials 84.3% 59.8% 85.7% 97.6% 88.5% 82.9% 69.9% 120.0% 24.6%
Heavy Commercials 86.9% 69.3% 80.7% 77.4% 80.0% 69.7% 60.5% 109.0% 24.6%

Capacity utilisation levels, during the first quarter of 2018, reflect the prevailing business conditions in the various industry segments in terms of domestic and export sales.

5.   VEHICLE MANUFACTURING INDUSTRY CAPITAL EXPENDITURE: 2008 – 2017

NAAMSA reports the industry’s aggregate capital expenditure on an annual basis. The aggregated data is based on Capital Expenditure details supplied by the seven major vehicle manufacturers. Details of actual Industry capex for 2008 through 2017, in Rand millions, are as follows –

Capital Expenditure

2008
2009
2010
2011 2012 2013 2014

 

2015

 

2016 2017
Product/Local/Content/Export Investment/ Production Facilities 2 807.7 2 215.9 3 351.1 3 522.7 3 837 3 605 6 092 5 948.5 5 146.1 7 144.6
Land and Buildings 329.1 178.7 441.2 176.4 432 424    478 190.5 905 301.4
Support Infrastructure (I.T., R&D, Technical, etc.) 153.1 74.1 202.4 203.6 409 319    347 464.3 363.5 724.6
Total 3 289.9 2 468.7 3 994.7 3 902.7 4 678 4 348 6 917 6 603.3 6 414.6 8 170.6

2017 data is based on data supplied by the 7 major OEM’s

2017 Capital expenditure at R8.7 billion represents a new industry record. The high levels in capital expenditure are due to Investment Projects by manufacturers in terms of the Automotive Production and Development Programme (APDP) and the projected higher levels of production for export markets.

6. BUSINESS CONDITIONS, PERFORMANCE INDICATORS AND COMMENT

Business Conditions: First quarter, 2018

2018 First quarter aggregate Industry new car sales at 95 846 units recorded a decline of 3 417 units or a fall of -3.4% compared to the 99 263 new cars sold during the corresponding quarter of 2017. Aggregate Industry commercial vehicle sales during the first quarter of 2018 at 45 425 units recorded a decrease of 2 597 units or a fall of -5.4% compared to the 48 022 units sold during the first quarter of 2017.

Industry Domestic Sales Growth: Direction and Extent of Change (previous quarter’s percentage changes are reflected in brackets)  
 
 
  Qtr ended 31 March 2018 compared with previous Qtr ended 31 Dec 2017 Qtr ended 31 March 2018 compared with corresponding Qtr ended 31 March 2017  
Passenger Cars +1.2% (-2.0%) -3.4% (+6.2%)  
Light Commercial vehicles -1.1% (-7.1%) -4.9% (-4.9%)  
Medium Commercial vehicles -12.6%  (+4.8%) -13.1% (-8.0%)  
Heavy Commercial vehicles -14.1% (-1.9%) -7.0% (+1.9%)  

Analysis of the figures reflect a mixed picture with the car and light commercial vehicle segments performing relatively better than medium and heavy truck segments.

South Africa’s Automotive Industry’s Performance in a Global Context: 2000 – 2017 Production data (updated and corrected figures)

Global new motor vehicle production in 2017 reached a record of 97 302 534 vehicles (2016: 95 057 929 units). This represents an increase of 2 244 605 vehicles produced or 2.4% compared to the 95.06 million new vehicles produced during 2016. South African vehicle production increased to 601 178 vehicles in 2017 from 600 008 units produced in 2016 – an improvement of 1 170 vehicles or +0.2%.

The following table reflects South Africa’s share of Global New Vehicle Production (in millions) –

  2000 2010 2011 2012 2013 2014 2015 2016 2017

% change

2017 / 2016

Global Production 58.4 77.61 79.88 84.14 87.27 89.77 90.84 95.06 97.30 +2.4%
South Africa Production 0.357 0.472 0.533 0.547 0.546 0.568 0.617 0.600 0.601 +0.2%
SA Share of Global Production 0.61% 0.61% 0.67% 0.65% 0.63% 0.63% 0.68% 0.63% 0.62% -1.6%

South Africa’s share of global new motor vehicle production in 2017 amounted to 0.62% - above the country’s share of global GDP of about 0.42%.

The current global vehicle population exceeds one billion vehicles. South Africa’s current vehicle population is around 12.2 million vehicles.

2018 Vehicle production is expected to expand to about 635 000 units

Comment on Industry Export Performance by major region – (The export sales figures have been corrected and updated)

Changing Composition of SA Vehicle exports by major regions: 2014 – 2017

  2014 2015 2016 2017

% change

2017 / 2016

Africa 61 839 42 234 21 564 21 848 +1.3%
Europe 116 077 173 805 195 764 190 503 -2.6%
North/Central America 48 408 54 000 52 430 44 202        -15.6%
Asia 33 520 34 306 47 616 52 827 +10.9%
Australasia 14 610 22 948 22 735 25 125 +10.5%
South America 2 482 6 554 4 750        3 588      -24.5%  
Total 276 936 333 847 344 859 338 093        -1.9%

Source: NAAMSA, AIEC, SARS, Lightstone Auto

Europe remains the dominant region for South African new vehicle exports. Potential new growth markets include Asia and Australasia. Interestingly, following three years of sharp declines in export sales to African markets – 2017 exports recorded a marginal increase suggesting that demand from the rest of Africa is stabilising at relatively low levels. Exports to North America declined and this trend is expected to continue as exports of the BMW 3-series to the United States come to an end.

Brief Comment on business conditions and the medium term outlook

NAAMSA expected new vehicle sales to show steady improvement over the medium term due to further recovery in domestic demand supported by continued moderation in new vehicle price inflation, rising real disposable consumer income, recent improvement in South Africa’s political and policy environment, lower interest rates and the maintenance of an investment grade rating with a stable outlook by a major credit ratings agency. As a result of these developments - reinforced by improved business and consumer confidence as well as increases in the Reserve Bank leading indicator – economic growth for 2018 could recover to around 1,8% and this in turn would benefit domestic new vehicle sales over the balance of the year and an annual improvement of domestic sales volumes of 3% plus compared to 2017 was possible.

Robust global growth should benefit new vehicle exports going forward. Exports were expected to show good upward momentum in the months ahead.  

Industry Vehicle Sales 2000-2018

Automotive Export Manual 2018

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