Oct 11, 2012
Auto component production not sufficiently incentivised – NaacamBack
Port|Port Elizabeth|Automotive|System|South Africa|Automotive|Local Component Manufacturing Sector|Roger Pitot
© Reuse this
Speaking at the South African Automotive Week, held in Port Elizabeth, Pitot said the APDP retained the duty-offset system of the Motor Industry Development Programme (MIDP) it would replace in 2013, whereby OEMs cash in their benefits by importing vehicles and components at lower duty rates, thereby providing little or no protection to component makers in South Africa as there was “effectively no import duty paid on components”.
“The APDP is still a duty rebate system. So, the more OEMs export and add value, the more they can also import,” said Pitot.
He noted that high enough vehicle exports – such as 80% of vehicle production from a plant - could ensure that OEMs could import all their component requirements duty-free.
Why would they then source their components locally, asked Pitot.
He added that OEMs had, from 2009 to 2011, imported R108-billion worth of components and subcomponents, while duties paid on these were R446-million, or 0.41%, compared with the R21-billion, or 20% which would have applied without the MIDP duty rebate.
Pitot also emphasised, however, that Naacam regarded the APDP’s production incentive, which rewarded local value addition, as a positive opportunity for the local component manufacturing sector.
He said real local content on locally produced vehicles was around 35% compared with the 55% to 60% often quoted, as the imported content of locally made parts had to be substracted first.
“The correct way is to measure the total component cost, less [the value of] all imports of components, subcomponents and materials,” he said.
“Many tier-one [component] suppliers still import substantial amounts of materials and subcomponents.”
Pitot said a bigger production incentive under the APDP would assist in curbing this trend. It would also promote the expansion of “sunrise type” of component industries in South Africa, seeing to the increased production of parts currently not flourishing under the MIDP’s incentive structure.
“Naacam believes the Department of Trade and Industry must relook the APDP mechanisms as soon as possible to ensure it’s an appropriate framework for industry and government to meet its objectives, namely doubling vehicle production volumes and substantially increasing local content,” he added.
When discussing general barriers to global competitiveness, Pitot noted that vehicle volume production were still low in South Africa, which constrained component manufacturers’ ability to achieve OEM demands for real cost savings.
Pitot noted that production of 100 000 units a year allowed for a far greater competitive advantage than 50 000 units a year.
“Monopolistic costs”, such as electricity tariffs, were also pushing up costs, while wage increases were not matched by productivity improvements.
Edited by: Creamer Media Reporter© Reuse this Comment Guidelines
Other Automotive News
Updated 7 hours ago Few would argue with the notion that unemployment, which stands at around 25% on the narrow definition as reported by Statistics South Africa, remains one of the country’s most pressing challenges. Fewer still could contest the view that South Africa’s education...
Recent Research Reports
Steel 2014: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2014 report provides an overview of the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon steel and stainless...
Projects in Progress 2014 - First Edition (PDF Report)
This publication contains insight into progress at the delayed Medupi and Kusile coal-fired projects, in Mpumalanga and Limpopo respectively, as well as at the Ingula pumped-storage scheme, which is under construction on the border between the Free State and...
Automotive 2014: A review of South Africa's automotive sector (PDF Report)
The report provides insight into the business environment, the key participants in the sector, local construction demand, geographic diversification, competition within the sector, corporate activity, skills, safety, environmental considerations and the challenges...
Construction 2014: A review of South Africa's construction sector (PDF Report)
Construction data released during 2013 hints at a halt to the decline in the industry during the last few years, with some commentators averring that the industry could be poised for recovery. However, others have urged caution, noting that the prospects for a...
Electricity 2014: A Review of South Africa's Electricity Sector (PDF Report)
This report provides an overview of the state of electricity generation and transmission in South Africa and examines electricity planning, investment in generation capacity, electricity tariffs, the role of independent power producers and demand-focused initiatives,...
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
This Week's Magazine
The Electronic Systems Laboratory (ESL) of the Department of Electrical and Electronic Engineering at Stellenbosch University is strongly reaffirming its position as one of South Africa’s leading centres for satellite technology and expertise. It is currently...
The world’s lowest-cost diesel-electric locomotive is not made in China, but in Pretoria, at RRL Grindrod Locomotives’ newly upgraded 30 000 m2 plant. The company’s locomotive pricing is “more competitive than any other original-equipment manufacturer (OEM)...
The South African Defence Review 2012, released to the public at the end of last month (despite the year given in its title) recommends the creation of the post of Chief Defence Scientist. This official would be responsible for the management of defence technology...
AltX-listed engineering technology company Ansys has been awarded an R188-million contract by Transnet to supply integrated dashboard display systems to the freight rail utility’s locomotives. Black-owned and controlled Ansys developed the bespoke integrated system...
South Africa’s sole nuclear power station Koeberg, which is located in the Western Cape, breached a major operations milestone on April 4, which marked the thirtieth anniversary of Unit 1 having been connected to the grid. Eskom, which operates the two-unit plant,...