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Market uncertainty drives need for efficient auto imports

MARKET IMPERATIVE
Automotive components imports remain vital as these parts are needed for the aftermarket sector

MARKET IMPERATIVE Automotive components imports remain vital as these parts are needed for the aftermarket sector

Photo by Bloomberg

2nd October 2015

By: Mia Breytenbach

Creamer Media Deputy Editor: Features

  

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As the volatile rand rate causes a flux in the logistics and import market, there has been a definite paradigm shift in the market as the industry moves towards a more integrated and, therefore, cost-effective solution for the automotive import process, reports import and working capital specialist Blue Strata.

“Market uncertainly is driving businesses to tighten control over their logistics process – trade finance is now being viewed as a broader import finance solution, rather than just a transactional one,” says Blue Strata CEO Adam Orlin.

In March, Orlin warned that, while the imports of automotive components held firm, the market would starting feeling the strain if the currency did not stabilise or “gain some ground”.

“While the weak rand has some benefits for many exporters, it impacts negatively on importers and exporters, which have a large imported automotive component in their products,” he noted.

Nevertheless, Blue Strata highlights that the South African Chamber of Commerce and Industry’s Business Confidence Index (BCI) for February 2015 “increased by 3.5 index points to 92.8 – where higher import and export volumes were the main source for the latest overall rise of the BCI”.

Orlin, therefore, reiterates that implementing the right technology allows for financiers to assign different values to different stock in a significantly dynamic way.

“This means that the collateral risk management platform allows for the company to update its risk management systems on a real-time basis in terms of the way it values assets. As a result, by being able to manage the risk, the financier can place value on goods in transit, instead of simply taking stock and debtors at a point in time,” explains Orlin.

Additionally, online access to real-time orders, foreign exchange information, shipment and delivery details, as well as payment particulars, enable importers to immediately have a dashboard view of their stock and investment. “This enables them to determine their total landed costs, including the cost of finance and other disbursements,” he elaborates.

Consequently, Orlin stresses, Blue Strata will also maintain its focus on presenting its turnkey service offering to the automotive components importers, highlighting the need for working capital to cater for growth in their businesses.

“As a member of the Retail Motor Industry Organisation, as well as the National Association of Automotive Component and Allied Manufacturers, Blue Strata is actively involved in driving discussions with automotive components importers to see if we can engage in mutually beneficial business partnerships going forward,” adds Orlin.

Blue Strata facilitates import transactions – from order placement, confirmation and tracking to the hedging of foreign exchange risk and the management of import logistics to delivery to the client’s warehouse. On delivery of the goods, Blue Strata provides a single invoice consolidating the total landed rand cost for each item, effectively becoming a local supplier of an imported product.

By financing the cost of goods, as well as the forwarding and clearing costs involved in the import transaction, Blue Strata releases a client’s working capital, which is tied up in imports and provides the client with payment terms that closely match the client’s cash-flow cycle.

Further, Orlin reiterates the importance of automotive components imports –especially because these parts are needed for the aftermarket sector. “Moreover, given the current depressed economic conditions, including the decline in new-vehicle sales figures, consumers might retain current vehicles, creating greater demand for aftermarket automotive components imports and parts,” he suggests.

Engineering News last month reported that the National Association of Automobile Manufacturers of South Africa had “cut its forecast for new-vehicle sales for the year by 32 500 units . . . [forecasting] 2015 new-vehicle sales to decline to 626 500 units, compared with the 659 000 units predicted in May”.

Edited by Samantha Herbst
Creamer Media Deputy Editor

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