Work on the Automotive Investment Scheme (AIS), which formed part of government's new Automotive Production and Development Programme (APDP), was "practically completed", following extensive consultation with the local automotive industry, said Trade and Industry Minister Rob Davies on Thursday.

He spoke at the announcement in Johannesburg by Ford Motor Company of Southern Africa that it would double its investment to produce a pick-up and engine range locally, pushing it up from R1,5-billion to R3-billion.

Davies noted that investments made by vehicle manufacturers in South Africa, spanning from 2009 to 2013, now totalled R9-billion, creating 3 500 direct assembly jobs, while also acting as a catalyst for R4-billion in investments in the component industry.

"These investments do not drop out of the air, they have to be won."

Davies said the AIS was viewed by "almost everybody as extremely attractive".

He said it was one of the main reasons for the many investment decisions made within the automotive industry recently, and that the progress in thrashing out the details had given members of the industry "enough confidence" to go ahead with their production plans.

Under the AIS, vehicle manufacturers would be able to redeem 20% of their automotive investment, should they achieve certain production milestones. However, manufacturers could push this up to 30%, if they achieved a certain level of local content.

Davies said these milestones were still the topic of discussion.

"The AIS was an important part in facilitating this [Ford's] investment."

DTI HAS BUDGET FOR AIS

Some industry commentators last year raised concerns that the Department of Trade and Industry (DTI) did not have the funding to make all of the payments the AIS would demand.

However, Davies noted that the DTI had already made a budget request, indicating the support it would need for the scheme.

"We were accommodated. We have the budget for this."

Davies reacted to a question surrounding higher vehicles prices in South Africa compared with other markets in the world, while tax-payer funds were being channelled to automotive schemes, by saying that the country had to provide support to the local automotive manufacturing industry to negate the cost of South Africa's distance to major automotive markets in terms of vehicle and component exports and imports.

He added that all the countries with automotive industries had support schemes, and that South Africa's "was not particularly generous in quantum of money provided".

He said it was "not by any means the highest level of payment" provided in the world.

Davies admitted that South Africa faced "slightly higher prices" for vehicles being sold locally.

He said the offset for all this was that South Africa had an industry which employed large number of people, and which provided the country with industrial capacity.

He said consumers could maybe buy cheaper cars, but that it would be in a country with a higher unemployment rate.

Davies noted that the local automotive industry, as the country's largest manufacturing sector, provided 7% of the country's gross domestic product prior to the recession, while it constituted 10% of manufacturing investment in South Africa, and 16% of total exports. The industry also provided 135 000 direct jobs.

FMCSA marketing, sales and service vice-president Jacques Brent said that South Africa faced a total tax burden of around 45% on an imported vehicle, compared with a country such as Taiwan, where it was around 60%.

He said dealer margins were also somewhat higher in South Africa than in other countries, and that it was more expensive to build vehicles in South Africa than in some other parts of the world.

Brent said it was important to compare base prices with base prices when it came to vehicles, stripping out additional add-on costs.

Davies also pointed out that duties on imported vehicles have come down from more than 100% to less than 30% in recent years, ensuring imported vehicles were less expensive.

Brent added that companies "priced off each other", placing their vehicles in a price category according to what their competitors charged.

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