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APDP local component quota should be higher

22nd February 2013

By: Chantelle Kotze

  

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The incentive structure of the new Automotive Production and Development Programme (APDP), which was implemented last month to replace South Africa’s Motor Industry Development Plan, does not do enough to encourage vehicle manufacturers to increase their percentage of locally produced components they use, says global professional services firm KPMG Africa automotive leader Gavin Maile.

He says the local automotive component industry would benefit more if the local content requirement for locally manufac- tured vehicles increased yearly from the current 25% by a certain percentage point up until 2020. “This would have gone a long way towards encouraging local capacity and job creation.”

Maile says the recent weakening of the rand will significantly impact on South Africa’s vehicle production as the country is still heavily reliant on component imports, which has a negative impact on our overall balance of payments.

“Although the local automotive retail market has not yet experienced a significant increase in vehicle prices, this is likely, owing to a weak rand increasing the price of import duties on components.

Further, in terms of the local content quota, if volatile global markets continue to strengthen instead of slump, the country’s move to increase its local export component quota will provide good export opportunities to international markets.

Meanwhile, National Association of Automobile Manufacturers of South Africa (Naamsa) states that, overall, this year is likely to be more challenging for the South African automotive industry. While prospects for the industry currently remain positive, sales volume growth is expected to be more subdued than the yearly growth in total sales recorded over the past three years, namely 24.7% year-on-year in 2010, 16.1% in 2011 and 9.2% in 2012.

In light of this, the industry remains well positioned to continue making a positive contribution to the South African economy, particularly if economic growth higher than 3% materialises, notes Naamsa.

Maile agrees with Naamsa’s outlook for the industry, adding that the future of the local automotive industry is dependent on the country’s gross domestic product (GDP).

“A GDP of more than 6% is needed to encourage good double-digit growth in the automotive market, as was seen between 2004 and 2006. I don’t see this happening in the short term and, therefore, I forecast single-digit growth of between 6% and 7% this year.”

Assuming that the South African economy will grow, in real terms, by about 3% this year, and taking into account the persistance of other expected domestic and international trends, Naamsa’s outlook for 2013 is for total vehicle sales of 685 000, the highest of which is 475 000 in the passenger vehicle segment.

Naamsa says the 2013 projections translate into an expected improvement of about 7.3% in domestic sales volumes for the year.

The South African automotive industry sold 55 007 new vehicles last month. This is an improvement of 6 805 vehicles, or 14.1%, compared with the 48 202 vehicles sold in January last year, and this signals a strong start to the new year, reports Naamsa director Nico Vermeulen.

There was continued strong demand by the car rental industry last month, which accounted for 14.3% of new passenger vehicle sales in 2012 and for 22.5% of new vehicle sales.

The new passenger car segment alone accounted for 39 738 of new vehicle sales last month. This is an increase of 12.2%, compared with the new passenger car sales of 35 390 in December last year.

All major vehicle segments recorded double-digit year-on-year growth in sales for January – the new passenger car seg- ment recorded a 12.3% increase, light commercial vehicles a 20% increase, medium commercial vehicles a 10.6% increase and heavy commercial vehicles a 30% increase, while sales of extra- heavy trucks increased by 16.6% compared with January 2012.

In vehicle manufacturer sales for January, Volkswagen Group South Africa (VWSA) topped the list, with 10 511 vehicles sold. Toyota South Africa Motors (TSAM) sold 10 219 vehicles; followed by General Motors South Africa (GMSA), with 5 585 vehicles; Nissan South Africa, with 4 645 vehicles; and Ford Motor Company of Southern Africa (FMCSA), with 3 969 vehicles.

Further, sales of 17 399 new vehicle exports were recorded for January, reflecting an improvement of 5 794 vehicles or a gain of 49.9%, compared with 11 605 new vehicles exported in January last year.

Assuming continued demand in most export markets, projected higher exports to African countries and the growing contribution of light commercial vehicle export programmes, Naamsa predicts industry export sales in 2013 to improve by about 83 000 vehicles, or by about 30%, compared with 2012. Total Industry exports are projected to reach about 361 000 vehicles this year.

Naamsa points out that the momentum of vehicle exports is expected to improve further this year, particularly light commercial vehicle exports, which should increase substantially.

In 2012, 623 914 new vehicle sales were recorded, which is a 9.2% improvement on the 571 415 new vehicles sold in 2011.

Naamsa declared TSAM as the 2012 market leader for the thirty-third consecutive year, selling 121 276 new vehicles that year, including 9 041 vehicles in December 2012.

VWSA’s highest overall industry sales of 10 511 vehicles last month comprised 8 226 Volkswagen passenger cars, 1 555 Audi-brand sales and 730 Volkswagen commercial vehicles, of which 9 781 were passenger cars. This achievement gave VWSA market leadership in the total and passenger car markets for that month and a market share of 19.1%.

Meanwhile, there was a welcome improvement in sales of GMSA’s light commercial vehicles last month. This segment’s sales increased by 20% from 11 120 in January 2012 to 13 346 in January this year. The Isuzu KB sold more than 1 350 units, reports GMSA.

FMCSA has also enjoyed a solid start to the year, with sales for January up 12%, compared with the same month last year.

The market continues to be driven by entry-level volumes, with the Figo claiming fourth position overall in the passenger car market, with 1 202 units sold last month. The Focus enjoyed its highest-volume month since its launch, selling 423 models, while the newly released Fiesta enjoyed sales of 488, despite going on sale only midway through January.

FMCSA says the outlook for Ranger volumes in 2013 is positive, off the back of a record year in 2012, with 15 804 Rangers sold.

Naamsa refects that 2012 turned out to be a year of relatively solid growth. New vehicle sales, in general, and new car sales, in particular, performed well above initial expectations, despite a slowing economy. Industry trading conditions remained intensely competitive, with more than 60 brands and close to 2 100 model deriva- tives in the new car and light commercial vehicle sectors competing for consumers’ franchise.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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