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Vehicle production is the second-biggest industry in South Africa's manufacturing sector, and one of the fastest growing. Vehicle exports have grown around ninefold since 1994, and now account for nearly 7% of the country's exports.
Overall, the automotive industry - including manufacturing, distributing and servicing of vehicles and components - is the third largest sector in the economy, after mining and financial services, contributing in the region of 7% to gross domestic product.
All of the major vehicle makers are represented in South Africa, as well as eight of the world's top 10 auto component manufacturers and three of the four largest tyre manufacturers.
Growth, investment
South African
vehicle exports are projected to rise strongly through 2006-08,
following a record year for South African vehicle production and
sales in 2005.
Domestic new vehicle sales soared by a record 22% in 2004, followed by a new record 27% in 2005, making the country one of the best performing automobile markets internationally.
Between 1999 and 2005, production of cars and light commercial vehicles grew from 315 000 to almost half a million units, while exports more than doubled from approximately 60 000 to 140 000 units.
Capital expenditure by the industry - investment in production and export facilities and supporting infrastructure - also more than doubled between 2000 and 2005, from around R1.5-billion to R3.6-billion, with further massive increases projected for 2006-08.
Most of this has been foreign investment, with the parent companies of local car manufacturers expanding local operations. All of the large manufacturers in the country have launched major export programmes in recent years - the latest being General Motors.
GM, Toyota, VW, Ford, Nissan ...
In
April 2005, General Motors awarded its South African arm a contract
worth US$3-billion (around R18-billion) to manufacture a new global
version of its Hummer sports utility vehicle - the H3 - for export
to markets in Europe, Asia Pacific, the Middle East and Africa.
GM said it would make a US$100-million investment in product development and production at General Motors South Africa's plant in Port Elizabeth in the Eastern Cape, which currently manufactures Opel and Isuzu vehicles. This is over and above the $50-million that GMSA invested in plant and equipment upgrades and the $80-million it invested in the new Isuzu KB in 2004.
Then in May 2005, Toyota South Africa announced an increased export drive that will see the company continuing its Corolla export programme to Australia - and also exporting a new light commercial vehicle and sports utility vehicle to Europe and Africa as part of Toyota's global IMV (innovative international multipurpose vehicle) project.
Soon after Toyota's announcement, Volkswagen South Africa announced that it would start building trucks and buses, possibly for export to Africa and other parts of the world.
In 2004, Volkswagen SA announced a R25-billion export programme that will see the company exporting about 2 300 of its new Golf 5 cars each month through 2009, mostly to Japan and Australia, but also to New Zealand, Brunei, Singapore, Sri Lanka, Hong Kong, Indonesia and Malaysia.
Other announcements by car manufacturers in 2004:
Ford announced that it would be investing R1-billion in starting a local export programme. The company said this would involve doubling production capacity at its Pretoria plant to about 80 000 units a year.
DaimlerChrysler confirmed that the new Mercedes-Benz C-Class would be manufactured in SA from 2007. The company plans to almost double production at its East London plant to roll out up to 80 000 units a year, a large portion of which will be exported.
Nissan announced that it would begin exporting fully built-up Hardbody one-ton bakkies to Europe, Singapore, Australia and New Zealand from August 2005.
Tata Motors, India's second-largest car manufacturer, invested some R40-million in a bus assembly factory in Johannesburg.
Motor Industry Development
Programme
The catalyst for this phenomenal growth has
been the government's Motor Industry Development Programme (MIDP).
Introduced in 1995, the programme is due to run, with gradual
phasing out, until 2012.
The MIDP has boosted exports by enabling local auto manufacturers to include total export values as part of their local content total, then allowing them to import the same value of goods duty-free. This has allowed auto makers to concentrate on manufacturing certain vehicles or components for export, while importing other models.
The MIDP also grants a production-asset allowance to vehicle manufacturers that invest in new plants and equipment, giving them 20% of their capital expenditure back, in the form of import-duty credits, over a period of five years.
Competitive advantages
South Africa
is ranked 19th in the world for vehicle production, accounting for
about 0.7% of the world's vehicle output.
Despite its relatively small size and production abilities, South Africa's automotive industry offers a number of competitive advantages to international concerns. These include a world-beating cost ability on short or low-volume runs, competitive tooling costs, and a high degree of manufacturing flexibility.
The local industry also has good access to southern hemisphere and African markets, and offers right-hand drive production facilities.
The right-hand drive models of Mercedes Benz C Class, BMW 3 Series, Toyota Corolla, Ford engines, VW Trucks and VW Golf/Jetta are all built on South African soil. By the end of 2006, these will be joined by the right-hand drive version of General Motors' new H3.
The South African industry boasts several unique technologies, such as differential locks for off-road vehicles, aluminium welding technology for radiators, and the ability to design components such as air cleaners and air conditioners that are able to cope with the higher temperatures and dust levels in Africa.
The country's first-world production facilities are coupled with access to raw materials and cheap electricity, as well as stable transport and telecommunications infrastructure.
The Automotive Industry Development Centre and the Gerotec testing centre near Pretoria are world-class facilities for research, design, testing and training.
New investment opportunities are being created for the industry by the introduction of free trade agreements with the European Union and the South African Development Community, as well as the US government's African Growth and Opportunity Act.
Auto component manufacturers
There
are more than 200 automotive component manufacturers in South
Africa, and another 150 which supply the industry on a non-exclusive
basis.
Pressure on prices, and the increased trend for suppliers to operate globally, has led to several mergers between component and original equipment manufacturers. These initiatives have produced the intended results, with locally made cars as well as components being exported in growing numbers.
Key component exports include stitched leather car seat covers, catalytic converters, tyres, silencers/exhaust pipes, and road wheels and parts. Export growth rates have been high - around 40% per annum between 1994 and 2004 - and are expected to remain high.
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