The poor macro-economic environment must be acknowledged as the most fundamental roadblock to the development of the local new vehicle market, and as a handbrake to manufacturing investment, says Audi South Africa head Trevor Hill.
While the South African automotive market can expect to see somewhat marginal improvement in volumes as the market moves into 2018, it remains highly unlikely that it will attract meaningful new investment until the issues of economic growth and an unstable rand are adequately addressed, he adds.
Sales growth – especially in the premium automotive segment – will be almost entirely organic and as a result of relative volume improvements arising from the introduction of new models.
Hill is cautiously optimistic on growth in the premium segment of around 10 000 units next year.
For premium car manufacturer Audi, new product introductions include the 2017 launch of the new Audi Q5, Q2 and A5 models, as well the introduction of the new A6, A7 Sportback, A8 and Q8 before the end of 2018.
“To complement this, we can also expect the introduction of the facelifted Audi TT and further investments in the Audi Sport brand next year. In 2019, we have plans to introduce the first fully electric Audi vehicle in South Africa – bringing what is arguably the most technically advanced vehicle ever produced by Audi to this continent,” states Hill.
“Most importantly, this represents an intentional multimillion-rand investment in creating the youngest portfolio of vehicles available locally as part of a deliberate effort to address a scenario where economic fundamentals, access to credit and poor consumer confidence are working against efforts to develop this market.
“The very real impact of this on consumer behaviour is already being felt with a visible extension in the traditional timeframes associated with three-to-four-year new vehicle rotation cycles.
Hill says improved access to credit finance, as well as improvement in interest rates and inflation will only serve to boost the market.
“Already we are seeing some strong positive improvements in volumes in August because of just this and we expect this to continue with further [interest] rate cuts in 2018.”
“While not a new theme, a poor macro-economic environment must be acknowledged as the most fundamental roadblock to the development and growth of a sector that drives progress in terms of much needed job creation, much needed foreign and domestic investment and much needed export earning potential,” emphasises Hill.
“Indeed, the lack of opportunities to invest is seriously concerning.”
The “absence of sustainable and clear prospects” for South African business remains a handbrake on general market confidence and consumer spending, as well as the ability for the automotive sector to trigger valuable and “long-term downstream economic and social shared value”, he adds.
“There are direct practical considerations of this, even for importers such as Audi, where – for example – the brand would seriously consider reinvesting in manufacturing capabilities in South Africa if the business case existed.
“As things stand, the capacity to produce exists, but the business case simply does not. The ball is in government’s court to address this,” says Hill.
He adds that it is important for the South African government to address additional oil refining capacity and a wholesale improvement in overall fuel quality standards.
“Resolving poor petrol and diesel standards will add greater impetus to our ability to introduce even more models to this market and support a domestic automotive growth agenda.”
Closing the policy gap on electrification also presents a significant growth opportunity, says Hill.
“This is not just a global issue. Locally, there remains an urgent need to deliver structurally to enable better electrification and improved mobility. Steps to address this will improve overall competitive performance for the country in terms of key drivers such as innovation, goods market efficiency and labour market efficiency.”