Mechanical Technology November 2015

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P U B L I C A T I O N S CR O WN

Automotive manufacturing: a snapshot O n the occasion of the southern African celebration of Yaskawa’s global centenary earlier this month, NAAMSA director, Nico Vermeulen gave a keynote address entitled, ‘The SA Automotive industry, challenges and opportunities’ . Summarising the structure of the country’s automotive sector, he reported that seven global OEMs – BMW, Ford, General Motors, Mercedes-Benz, Nissan, Toyota and Volkswagen – have manufacturing plants in South Africa, and several other OEMs, from Europe, Japan, Korea, India, China, Italy and America, import and support their vehicles. “In addition, a number of heavy commercial and bus manufacturers assemble vehicles here,” he said.

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“There are also approximately 500 automotive component suppliers, including diversified manufacturers, supporting the industry,” he added, making the automotive industry the largest of the manufacturing sectors with vehicle and component production representing about 30% of manufacturing output. Showing a slide of unit sales growth, Vermeulen pointed to substantial growth from 2003 to the beginning of the global financial crisis in 2007. “The South African economy grew at 5% during this period, creating a massive surge in demand for new cars, resulting in 20% year-on-year growth for the industry.” The impact of the crisis is reflected in the 2008 and 2009 sales figures, which dropped back to 2003 levels at their lowest point. But, in spite of slow current GDP growth of 1.5% or less, 2015 sales are at highest ever levels – the industry is on target to hit a production record of 630 000 vehicles this year and, most importantly, 330 000 of these are exports. “That is what drives this industry, the business of component suppliers and, ultimately, the busi- ness of manufacturing and automation service providers such as Yaskawa,” he said. “Even in these difficult times, the industry is performing well – probably one of the few manufacturing success stories of 2015.” The export growth began with the launch of the Motor Industry Development Programme (MIDP) in 1995, which was replaced by the Automotive Producers Development Programme (APDP) in 2013. “The APDP provides a clear, albeit ambitious vision for the SA automotive industry through to 2020. The programme was formulated on the basis of extensive consultation with industry stakeholders and represents a carefully structured set of provisions to support the future growth and development of the industry – balancing the interests of consumers, the broader automotive industry and govern- ments’ objectives,” Vermeulen said. The APDP target of 1.2-million vehicle production by 2020 was formulated in 2007 – prior to the global financial and economic meltdown. “A more realistic target – based on current global reali- ties, existing vehicle production plans as well as the possibility of new entrants – is probably around 850 000 to 900 000 vehicles produced by 2020 – a 45% increase on current production levels,” he added. This would elevate the industry’s contribution to South African GDP to nearly 10%. “The MIDP and the ADPD have resulted in massive investments by multi-national vehicle manu- facturers and component suppliers. Capital expenditure by the seven major vehicle producers over the last five years amounted to over R24-billion and projected capital expenditure by the OEMs for 2015 is R7.5-billion. “Model rationalisation has resulted in a reduction from 42 platforms produced in South Africa 20 years ago to 12 platforms today. This, in turn, has contributed to substantially higher volumes per model produced and has generated economies of scale benefits and reduced complexity for sup- pliers,” he reported, adding that employment in the vehicle and component manufacturing sectors, on the back of higher production numbers, has increased by 1 200 to over 31 000 jobs over the past 15 months. Since the start of the APDP, total local value addition rose from R41.8-billion in 2013 to R47‑billion in 2014 – an increase of over R5-billion or 12.3% in the first two years of the programme. In spite of the successful impact the ADPD has had on the automotive industry, Vermeulen high- lighted some challenges that could inhibit sustained growth. “Stability – including policy certainty and labour predictability – is a key imperative to drive industry investment, development and future growth. Strong global linkages along with supplier development and competitiveness improvements remain critically important to support the sustainable future of the SA automotive industry,” he said. “We also believe that vehicle taxes should be reviewed. If all taxes are taken into account, 18% of the cost of every entry-level vehicle goes to the fiscus, while for luxury vehicles, tax accounts for some 45% of the purchase price. This is excessive if the government wants more vehicles to be sold,” Vermeulen suggested. The growth potential of the South African automotive industry remains above average and, with the right policies, interventions and goodwill by industry stakeholders, including unions, this industry can go from strength to strength,” he concluded. And from a component point of view: ‘The global market would definitely buy from South Africa if the economic environment was stable and prices were competitive,” suggests Yaskawa Southern Africa’s Terry Rosenberg. Peter Middleton

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Mechanical Technology — November 2015

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