Vehicle manufacturer Nissan South Africa (Nissan SA) aims to increase local content on its locally produced cars and pick-ups from the current 40% to 45% in value terms, to 60% over the next two to three years, says Nissan SA senior GM: purchasing Dave Cameron.
He says the company will start by investigating the substitution of high-volume parts – with the associated high shipping costs from Japan – and high-value parts, “with lots of duty on them”, with local parts.
Cameron says his Japanese parent company has advised him to accelerate the search for local content, in an attempt to drive costs down.
This should provide a faint glimmer of hope to the local component manufacturing industry, currently staggering under the weight of the global credit crunch, and the subsequent sharp drop in vehicle sales.
“There is, for example, the opportunity for Nissan to source its exhaust systems locally,” notes Cameron, currently on a three-year secondment from Nissan Europe.
“Often chassis parts can be produced locally. “The development has already been done overseas, and this can now be transferred to local companies.”
Cameron says the biggest limitation in increasing local content is the cost competitive-ness of local suppliers compared with Thai, Eastern European and South American parts suppliers.
The weakening rand has aided South African component suppliers in this department in recent months, but local parts are still 20% to 30% more expensive (ex works) than those churned out by their Thai counterparts.
“Before the rand weakened, this difference was 40%,” says Cameron.
Nissan SA hopes to produce 45 000 vehicles at its Rosslyn plant this year.
In the 2007 financial year, Nissan SA spent around R1-billion on locally made parts, the same amount on local services, support and capital, and R200-million on local materials.
“If we are able to increase the local content to an average 60%, then we are effectively upping our allocation for local business by R500-million,” states Cameron.
Nissan SA currently has around 120 suppliers.