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SA industry takes wait-and-see approach as Trump piles pressure on carmakers

27th January 2017

By: Irma Venter

Creamer Media Senior Deputy Editor

     

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It is too early to speculate on the effects the incoming Trump administration may have on automotive trade between South Africa and the US, says National Association of Automobile Manufacturers of South Africa (Naamsa) director Nico Vermeulen.

“It is best to wait for the installation of the new administration so that we can gain clarity on US trade policy.”

In an interview with German newspaper Bild, published earlier this month, then President-elect Donald Trump – who continues to signal a more protectionist US trade policy – criticised German carmakers for failing to produce more cars on US soil, threatening them with a 35% import duty. He especially targeted imports from Mexico.

Vermeulen says Trump’s comments appear to take aim at Mexico only, where several German manufacturers have set up shop, and not South Africa, from where companies such as BMW Group South Africa (SA) and Mercedes-Benz South Africa (MBSA) export vehicles to the US.

Mexico, Canada and the US manage trade within the North American Free Trade Agreement, or Nafta, which entered into force in 1994.

The South African automotive industry’s trade with the US is governed by the African Growth and Opportunity Act (Agoa), implemented in 2000. The legislation enhances market access to the US for qualifying sub-Saharan African countries.

Agoa is “quite different” from Nafta, says Vermeulen. Agoa is not a free-trade programme, but a developmental and assistance programme.

Despite the nature of the programme, however, Agoa has facilitated two-way growth in automotive trade between South Africa and the US, with South Africa not the only beneficiary of the agreement, he stresses.

“In fact, the growth in US exports to South Africa has outstripped the growth in exports from South Africa to the US.

“I don’t think the US has to worry about the small number of automotive exports from South Africa.”

Vermeulen says Naamsa has had discussions with the US trade representative in South Africa.

BMW SA Not Worried
BMW Group SA says it will not suffer any negative effect from Trump’s threat to implement a 35% import duty on German cars.

The company exports the 3 Series from its Rosslyn plant, in Tshwane, to the US.

Group communications GM Diederik Reitsma also believes that Trump’s threat is only aimed at vehicles imported from Mexico.

He adds that BMW Group SA will, in the near future, move to production of the X3 model, which will not be exported to the US.

The German carmaker is investing R6-billion to produce the sports utility vehicle in South Africa.

MBSA declined the opportunity to comment.


According to the South Africa Automotive Export Manual 2016, South African parts and vehicle exports to the US totalled R17.1-billion in 2014, growing to R20.9-billion in 2015.

It is, however, important to take note of the rand’s significant weakening against the US dollar since 2014. The rand was valued at around R11 to the dollar in January 2014, tumbling to R15 to the dollar at the end of 2015.

The export of vehicles from South Africa to the US has declined from 68 948 units in 2011, to 48 669 units in 2015.

Parts and vehicle imports into South Africa from the US remained stable from 2014 to 2015, at about R11.8-billion. Of this number, vehicle imports reached about R4.7-billion.

South Africa exports vehicles, catalytic converters, engine parts, radiators, silencers and tyres, among other goods, to the US. The country imports vehicles, assembly line parts, engine parts, engines and transmission shafts and cranks, among other goods, from the US.

US companies Ford and General Motors assemble vehicles in South Africa.

Trump was inaugurated as US President on January 20.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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