Friday, 13 November 2015

A Quick Look at South Africa’s Automotive Industry

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It seems impossible to believe but there are a great many new cars and hybrid cars being manufactured in South Africa. When you consider that the automotive trade is one of the most global industries on the planet perhaps it isn’t that strange. Automotive production in Africa is one of their most important sectors which employs over 30,000 in the OEM (original equipment manufacturers) and 80,000 in the secondary manufacturing levels and it contributes heavily to jobs in the region. The growth/decline of this industry in SA is a living thing and is currently being addressed with vigor by the government.

The industry is looking to produce more than 1.2 million autos annually by 2020 with incremental increases in the employment numbers as well. On an overall basis the industry employs over 300,000 in the manufacturing and related sales areas which are a tremendous boost to the overall economy in the entire region. Even though the industry does manufacture domestic trucks and military vehicles its main product is foreign brands of automobiles for other companies. Those would include Ford, Daimler-Chrysler, Toyota, Volkswagen and BMW.

Currently the market faces four things that it must address quickly. Those would be the following:

  • - Access to markets – In this area the African government will have to play a larger role so products can enter SA and that our products can move into traditional markets as well. SA must also produce a vehicle that will sell there as well.
  • - Develop more competitive supply chains – These manufacturers are always under pressure to lower prices but due to large inventories, high cost of transport and unreliability of rail transport they cannot. The inability of these manufacturers to work with one another keeps this from taking place.
  • - Skills and Training – Due to a shortage of skill sets the SA government, labor and stakeholders are making efforts to provide a pool of prospective employees from the region. This is being done by training through technical colleges, universities and other institutions to provide these future employees.
  • - Future solutions – Things that are needed to help all this to happen will be to increase manufacturing, keeping all the OEM suppliers in general area that will meet international and environmental standards and place assembly areas and suppliers into one fairly central location.

The total vehicle production for the current year (2015) will be around 10.3 million vehicles and for next year should be over 11.2 million. The total assembly investment in SA automotive trends have shown from 2003 up until 2014 has gone from R2.3bn to R6.9bn. In a short span of 11 years that is a dramatic increase indeed. With new stimuli put into place this will become an even more exciting market than it already is.

The DTI (Department of Trade and Industry) in the Republic of South Africa has developed a program named the Automotive Production and Development Program. It has helped tremendously in the effort to bolster the automotive production sector of the economy. It has 4 areas of interest.

  • - table import tariffs
  • - Vehicle assembly allowance
  • - Production incentive
  • - Automotive investment scheme

The government is working diligently to make the conditions for automobile manufacturing better and provide working situations that will be compatible to growth and stability. They have in development programs totaling almost R3.600bn through 2023. South Africa’s automotive industry the growth/decline is yet to be determined. However for those of you looking to purchase new cars, hybrid cars, the chances that it may very well come from South Africa are pretty darn good. They are placing a lot at stake on the industry becoming a permanent piece of Africa’s future.