SOUTH Africa’s automotive manufacturing industry – despite being imperilled by imports, power outages, export levies and poor rail and port infrastructure – will raise this year raise production and exports of locally made vehicles, says the National Association of Automobile Manufacturers of SA (Naamsa).
In a presentation at the ongoing South African Auto Week, Naamsa said the industry would this year raise production by 10.6% to 614 900. This was set to propel domestic sales by 6.3% to 563 000 and exports to 380 900, an increase of 8.3% on the prior year levels.
Imported vehicles will also likely grow only by a marginal 1.3% to 327 000 this year, data from the automotive manufacturing industry body shows. The Eastern Cape has emerged as South Africa’s biggest manufacturing hub for vehicles, accounting for 53.5% followed by Gauteng at 33.7% and KwaZulu-Natal, which has 12.8% of local vehicle manufacturing.
The association said the South African automotive sector – which is the largest single local industry making up for 21.7% of all manufacturing activity – contributes about 4.9% to gross domestic product.
As many as 497 408 formal and informal workers, which is about 2.9% of total national jobs, are currently employed by South African car makers, with Stellantis recently announcing a $160 million (R3 billion) investment into a new vehicle manufacturing line.
“NEV sales reflected a significant year-on-year increase of 421.7% from 896 units in 2021 to 4 764 units in 2022, but remain negligible as a percentage of total new vehicle sales. Sales of battery electric vehicles breached the 500 units per year mark in South Africa for the first time with sales of 502 units in 2022,” said Naamsa.
For the year to August 2023, compared to the same period last year, plug-in-hybrid vehicles increased by 37% while there were 54.9% more traditional hybrid cars. Purely electric vehicle have massively increased by 128,5%, driving up the total number of registered vehicles in South Africa to 13 million.
Firmer local production has helped the South African auto industry to grow export earnings to R227.3bn last year, with the vehicles export to about 152 destinations. The UK, Germany, France, Japan, US, Italy, Belgium, Australia, Spain, Netherlands are the major destinations while VW, MBSA, BMW, Ford and Toyota make up the top exporters list.
The US International Trade Administration says South Africa’s automotive sector remains “one of the most visible sectors receiving foreign investments” at a time the local economy is facing constraints.
About seven Original Equipment Manufacturers (OEMs) in the automotive industry invested R8.8bn in 2021 while the vehicle components sector also invested a significant R5.7bn the same year. The Department of Industry has a masterplan to grow South African vehicle production to 1% of global output and increase local content in South African assembled vehicles up to 60% by 2035.
In spite of this, South Africa’s auto manufacturing industry is facing challenges just like most of the country’s industry sector.
According to Naamsa, load shedding presents a significant challenge for SA OEM’s sector and the value chain. For the year to October 2023, South Africa had been load shed for 5 833 hours, totalling 243 days.
Moreover, deteriorating ports, rail and road infrastructure as well as rising logistics costs are spelling challenges for the industry. There is also the impact of commodity price fluctuations on raw materials to contend with.
“Resurgent volatility in commodity markets affect vehicle production materials used in a building a car. Mining output was affected by operational challenges – including safety stoppages and logistics disruptions – along with power cuts, persistent freight rail.”
Other pressures are emanating from high taxation for manufacturing vehicles that are destined for export market while the “shift towards electric vehicles has led to a demand for workers with specialised skills in electric powertrain systems, battery technology, and charging” infrastructure.
BUSINESS REPORT