Dr. Norman Lamprecht, Executive Manager of the National Association of Automobile Manufacturers of South Africa (NAAMSA) as well as the Automotive Industry Export Council (AIEC) has released his 2019 Automotive Export Manual publication on 3 May 2019, which he produces annually on behalf of the AIEC. He highlighted that several new records on the industry’s export side compensated to a large extent for the decline in the domestic new vehicle market in 2018.
In 2018, the value of vehicle and automotive component exports reached a record R178,8 billion to a record 155 export destinations. This excellent performance could mainly be attributed to the record 351 139 left- and right hand drive vehicle exports with a record export value of R127,5 billion. Automotive component exports also increased by 2% from the R50,3 billion in 2017 to R51,3 billion in 2018. The export value to 25 of the 155 destinations more than doubled on a year-on-year basis. Motor industry exports comprised a substantial 14,3% of total South African exports in 2018. Total automotive revenue in the ambit of the automotive business sphere in South Africa, which includes new and used vehicle sales, parts sales as well as repairs, amounted to R503 billion in 2018.
As the largest manufacturing sector in the country’s economy, vehicle and component production accounted for 29,9% of South Africa’s manufacturing output in 2018. The broader automotive industry’s contribution to the GDP again comprised a significant 6,8% (4,3% manufacturing and 2,5% retail). Lamprecht said that the motor industry in South Africa continues to reflect how automotive policy and foreign direct investment combine to positively benefit the country’s economy.
The domestic automotive industry’s top export markets in value terms in 2018 were Germany, with R57,6 billion (the first time the export value to a single country exceeded the R50 billion level), followed by Japan and Thailand. The UK, with 119 578 vehicles, was South Africa’s top destinations for vehicle exports in 2018. Mercedes-Benz, with its C-class, continued to be the pace-setter in terms of vehicles exported in 2018. The high-value, logistics-friendly catalytic converters, with an export value of R19,2 billion, remained the most popular component exported followed by engines and engine parts and tyres.
The trade arrangements that South Africa enjoy with the European Union (EU), allowing for duty free vehicle and automotive component exports to the 28 countries in the region, as well as the AGOA trade arrangement with the USA, enhanced exports to those countries. The EU, with exports of R105,2 billion, or 58,8% of the total export value of R178,8 billion, was the domestic automotive industry’s main export region in 2018. Africa was the industry’s second largest export region with an export value of R31,69 billion, or 17,7% of the industry’s total export value. Vehicle exports to 33 African countries increased from 21 847 units in 2017 to 23 988 units in 2018. Africa remains a priority focus for the South African automotive industry given the huge potential of the continent with a population of 1,29 million and a low motorisation rate at 42 per 1 000 persons, compared to the global average of 180 vehicles per 1 000 persons. Regional integration in Africa could unlock many opportunities for South Africa. The elimination of trade barriers as well as possible partnerships with other countries in Africa interested in developing their motor industries would provide opportunities of mutual benefit for the domestic automotive industry.
On the import side the top country of origin for vehicle imports in 2018 was India, with 98 586 units, or 33,8% of total passenger car and light commercial vehicles imported. India’s profile is suited to produce small cars, which dominate its domestic market. Volkswagen’s Polo Vivo is the only vehicle in this segment manufactured in South Africa. The value of vehicle imports from Germany, which included the premium brands, however, was almost double of those imported from India. According to Lamprecht only one or two selected high volume models are manufactured by each vehicle manufacturer in South Africa, linked to export contracts to obtain economies of scale benefits, coupled with imports of low volume models. 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.
Consumers demand access to the latest models and technologies on the market and vehicle companies have to deliver. The trading environment in South Africa is extremely competitive and in 2018 offered no fewer than 49 passenger car brands and 3 716 model derivatives, the widest choice to market-size ratio anywhere in the world. Similarly in the light commercial vehicle segment there were 30 brands with 656 model derivatives for consumers to select from. The Toyota Hilux remained the most popular vehicle sold in the South African market in 2018, with sales of 40 022 units.
Imports of original equipment components used to manufacture the vehicles amounted to R97,8 billion in line with new model launches and higher year-on-year vehicle production in the country. Germany, Thailand and Japan represented the main countries of origin for these components. Capital intensive and complex components such as engines, gear boxes and electronic interiors components are mainly imported where the relatively low volumes make the projects not economically viable at present in the domestic market. Global sourcing principles apply, which mean that every vehicle manufacturer sources a specific component from a specific globally recognisable brand supplier. The movement of the rand remained relatively stable against major currencies in 2018. The rand exchange rate, however, reacts differently to different countries and also at an individual company level, depending on the particular firm’s exposure to imports and exports.
Although South Africa’s automotive industry is significant in the context of the country’s economy and also in Africa, accounting for 54,3% of the continent’s vehicle production in 2018, the industry remains relatively small in a global context. South Africa, with production of 610 854 units was ranked 22nd in respect of global vehicle manufacturing with a market share of 0,64% in 2018. Lamprecht said that domestically and internationally there are many challenges the industry has to confront on a daily basis. Trade tensions between the world’s largest economies at present create uncertainty and have a direct as well as indirect impact on the domestic automotive industry. Currency volatility, increased protectionism as well as fiercer competition in export markets are examples of such impact.
Lamprecht said that the South African government attaches high importance to the significant role that the automotive industry plays in the country’s economy and confirmed this with the announcement of the South African Automotive Masterplan (SAAM) 2021-2035 which will support the industry over the next two decades. He said that the SAAM creates the framework to secure even higher levels of vehicle and automotive component production, investments, employment and transformation in the industry. According to Lamprecht the future is paved with numerous potential opportunities in support of the further long-term growth and development of the automotive industry in South Africa.