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South Africa raises import duty on car batteries to 15%

24th April 2015

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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The ordinary import duty on automotive lead-acid batteries increased from 5% ad valorem to 15% ad valorem from April 10, says the International Trade Administration Commission of South Africa (Itac).

Ad valorem duties are duties levied according to the value of goods.

The increase followed the consideration by Itac of a joint application by Powertech Batteries and First National Battery (FNB) for an increase in the rate of customs duty on automotive lead-acid batteries of a kind used to start piston engines, from 5% to 30% ad valorem.

FNB is owned by Metair, and Powertech by Altron.

“The applicants cited in their application that, in recent years, the imported automotive lead-acid batteries have continued to flow into the Southern African Customs Union (Sacu ) market,” says Itac in a statement.

“As a result, local manufacturers have found it increasingly difficult to compete with the imports as the pricing models adopted by foreign manufacturers are often below local costing. They considered this influx of low-priced batteries as a threat to the local battery manufacturers’ performance in relation to sales, market share and employment.

“They also stated that the majority of imports originate from South Korea, where these manufacturers enjoy government-sponsored grants and incentives.”

Itac says FNB and Powertech Batteries also noted that a number of battery importers are sending back scrap batteries to the countries where they are originally manufactured. This increases the cost of domestically recycled lead, which makes local battery manufacturing “uncompetitive and uneconomical”.

According to the applicants, it is estimated that importers have grown their share of the South African battery market from about 8.5% in 2010 to just more than 20% in 2013.

“Thus, this has had a significant negative impact on local manufacturers, which has been compounded by the exportation of scrap batteries,” notes Itac.

The domestic battery industry has the capacity to produce around five-million automotive batteries a year, which is sufficient to supply replacement market demand in the Sacu region – estimated at about four-million units – as well as the requirements of South African vehicle assemblers, the commission adds.

“Over the period of the investigation, the local manufacturers produced, on average, four- million batteries per annum. Following a decline in production volumes between 2012 and 2013, total industry capacity utilisation declined from 77% to approximately 70% over the same period.

“According to the information at the commission’s disposal, the domestic industry experiences price disadvantages, [compared with] foreign manufacturers, in the face of rising domestic production costs and declining profitability,” states Itac.

The commission says comments in support of the application were received from the National Association of Automotive Component and Allied Manufacturers, Dixon Batteries, Chloride Exide Botswana and the Botswana Ministry of Trade and Industry.

Those who objected to the application included Powabatt Batteries CC, the Association of Motorcycle Importers and Distributors, KMSA Distributors, MotoSport Distribution, Interac Distribution, the South African Battery Importers Association, Duratec Batteries, the National Association of Automobile Manufacturers of South Africa, Kestrel Technologies and HTC Industries.

The objections centered on the inclusion of batteries for motorcycles, which are not manufactured domestically, the insignificant price differentials between domestically manufactured products and imported equivalent products, perceived restrictive business practices by local manufacturers and the cost-raising effect of the duty.

Itac says it considered the application in light of the information at its disposal, and took the following factors into account: the increase in the level of imports, and concomitant erosion of the market share of the Sacu region manufacturers of automotive lead-acid batteries; the declining profitability of the domestic firms manufacturing the subject product, negatively affecting domestic employment and investment opportunities; the considerable decline in production levels and capacity use; and the price disadvantage experienced by the domestic industry, compared with foreign manufacturers, especially in East Asia.

The commission says it found no justification for an increase in duty to the requested level of 30% ad valorem.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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