A local automotive industry with five vehicle manufacturers producing 150 000 units each a year might be better than seven to eight manufacturers producing between 50 000 and 100 000 vehicles each a year, says former National Association of Automotive Component and Allied Manufacturers (Naacam) executive director Roger Pitot.

Pitot headed up Naacam twice, first as executive director and then as adviser following the departure of Robert Houdet last year. He has now finally handed over the reins to Renai Moothilal, a former senior official in the Department of Trade and Industry’s (DTI’s) automotive policy unit.

Pitot says fewer original-equipment manufacturers (OEMs, or vehicle manufacturers) producing more vehicles a year will provide the economies of scale necessary to grow the localisation of parts in the South African auto industry, as well as employment numbers.

Some OEMs have responded positively to the incentives government has put in place through its Automotive Production and Development Programme (APDP), says Pitot. However, others have a less stellar record, which must be one reason why government has decided to revisit its incentives structure, through the drafting of an automotive master plan for the country.

The master plan looks set to replace the APDP, which comes to an end in 2020.

The APDP incentivises increased exports, as well as production volumes, with initial model volume requirements starting from 50 000 units a year; however, this has now been reduced to 10 000 units a year.

It is “a miracle” that South Africa still has an automotive manufacturing industry, says Pitot.

South Africa and Australia are the only two vehicle-producing countries in the world that are not large new-vehicle markets themselves, or located close to a large market – and Australia’s automotive industry is closing down rapidly.

“Being one of these two markets does not mean that government has to provide incentives of such a proportion that OEMs have no option but to stay,” emphasises Pitot.

He believes it is important for the long-term survival of the industry to create depth in the sector.

There is a relatively stable number of tier-one component suppliers in South Africa, supplying directly to OEMs, says Pitot. However, the number of tier-two and -three suppliers – supplying to tier-one companies – is dwindling fast.

“Most of the tier-one suppliers are multinationals and many of these are importing their subcomponents, instead of using local tier-two and -three suppliers. In doing this, they have simply become component assemblers. This means we have more and more assemblers, and fewer and fewer manufacturers.

“This means, logically, that the 2035 master plan will have to say that South Africa must produce more vehicles, with higher local content. This is the only way in which we will create more employment.”

The drafting of the 2035 master plan is being coordinated by Justin Barnes of B&M Analysts.

The process follows five phases, with three of these phases already completed.

Phase 4 will look at the vision of the master plan, while Phase 5 will investigate the nitty gritty of the support to be provided by government to OEMs and component makers.

“Phase 4 needs the sign-off of everyone – this is vital,” says Pitot.

He adds that the master plan will perhaps need to look at a transitional incentive for OEMs starting the manufacture of a new vehicle model from 2017 to 2019, as their investments were probably made under the belief that the APDP would be continued beyond 2020.

One other aspect the master plan must tackle is the global transition in automotive technology to lightweight materials, as well as increased electronics.

“We must, for example, look at creating a plastics value chain in South Africa. Also, a number of OEMs use aluminium body parts; although, in some cases, they are stamped here, the aluminium is imported,” says Pitot. “We must also investigate the rise of hybrids and electric drive.”

Any master plan requiring government support would also need to address transformation, he adds.

“The automotive sector shows a distinct lack of transformation. A lot of companies are multinationals and they say that they cannot give up ownership of their companies.

“What we must do is to create a lot of black companies within the industry, most likely at the tier-two and -three levels. It is also possible to push for dealership ownership to change.

“If the industry doesn’t do this, it is an open question whether government will continue to support the industry at current levels through to 2035.”

Pitot adds that it is important that all government departments rally behind the master plan, as has been done in countries such as Thailand, and not only the DTI.

“We must look at the industry from mining to logistics and trade.”

African Dream
Pitot worked in the Ford finance department in 1972. During this time, Ford in South Africa designed the Cortina pick-up, with the aim of selling the vehicle in the local market, as well as the rest of Africa.

Does this Sound Familiar?

“We have this dream of selling locally made vehicles and pick-ups in Africa, but we compete with cheap used imports of around one-million vehicles a year. No government will ban imported vehicles, as they will lose power if they do so, having made motoring unaffordable for their people,” says Pitot.

“I don’t think this model of exporting new vehicles to Africa will succeed any time soon. However, the aftermarket parts market in Africa is huge. Tyres, batteries, glass . . . If we don’t get in there in a serious way, then the US or France or Asia will steal the market from us. Africa must be South Africa’s aftermarket territory.”

Pitot says he will remain part of the South African automotive industry in future.

“My passion is to help component manufacturers. I hope to help them in any way I can, from black empowerment to reducing manufacturing and logistics costs.”

Pitot has been part of the local automotive industry since October 1, 1970, when he started work at Ford in Port Elizabeth as a financial analyst.