Domestic truck market too small to justify rise in local content
The South African new-truck market is too small to justify increasing local content on vehicles assembled locally, says Toyota South Africa Motors (TSAM) president and CEO Dr Johan van Zyl.
Van Zyl is also president of the National Association of Automobile Manufacturers of South Africa (Naamsa).
TSAM assembles around 4 000 Hino trucks a year at its Durban plant. The total South African new-truck market numbers around 30 000 units a year.
Any move too far away from the current formula will probably see job losses in the truck assembly industry in South Africa, says Van Zyl.
He says government should rather retain its current support for local truck assemblers, while offering incentives to importers to move to local assembly.
Moving to cab assembly is not economically viable in South Africa, says Van Zyl.
South African truck assemblers currently pay no import duties if they practise semi-knockdown assembly (SKD, or partial assembly) of their vehicles locally. This, on average, means marrying the chassis to an already assembled cab.
However, government in July proposed some changes to the status quo when it released its Medium and Heavy Commercial Vehicle Automotive Investment Scheme (MHCV-AIS) for comment.
This proposed scheme has two goals. The first is to encourage already established truck and bus assemblers to add value to their products, increase localisation and, through this practice, increase their labour contingent.
For truck and bus brands currently importing their products, the goal is to use incentives to move them to SKD assembly.
Government proposes, under the published guidelines, that the MHCV-AIS will return 20% of the total value of their investments to relevant vehicle manufacturers and 25% to components and tooling companies.
Van Zyl says Naamsa is engaged with the Department of Trade and Industry (DTI) on the MHCV-AIS, emphasising that the two parties have always had “good working relations”.
Government’s Automotive Production and Development Programme (APDP), which incentivises volume production of bakkies and cars in South Africa, is currently the subject of a review.
Van Zyl says it is important that the review does not make any structural changes to the support programme, as this may erode certainty in the automotive industry.
However, he says Naamsa would like to see components suppliers receive greater benefits from the APDP.
Naamsa will also be glad to see the APDP extended beyond its current 2020 deadline, as has been hinted at by the DTI.
Van Zyl regards manufacturing as vital to the South African economy. He refers to a Japanese philosophy that states: “If you make things, you make people.”
He says it is important for South Africa to “break the cycle” in terms of the country’s automotive industry’s reputation of being an unreliable supplier to the world economy, owing to recent protracted strike action.
While strikes happen worldwide, labour action lasting four to eight weeks, bringing an entire industry to a standstill, “is unheard of”.
Van Zyl says Naamsa has been in continuous talks with the National Union of Metalworkers of South Africa (Numsa) on how the 2016 round of labour negotiations will be conducted.
“We need to find a new way to negotiate. It does not help [to] rearrange the deck chairs. The situation will only change if we make a fundamental change.”
Some of these changes may include revisiting labour legislation and the decision processes regarding strikes, limiting strike periods, and introducing arbitration into the process.
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