The trade and industry department (DTI) is to implement a number of steps in an effort to sustain and grow the automotive industry while steering it towards the Automotive Production and Development Programme (APDP) vision of high volume vehicle production.

The APDP was fully implemented by January 2013 with a view to steer the automotive industry towards producing about 1.2-million vehicles by 2020 with attendant expansion of the domestic supplier base, Trade and Industry Minister Dr Rob Davies said in a statement on Sunday.

However, the APDP review stated that the 2020 target of producing 1.2-million vehicles per year was unlikely to be achieved due to a variety of reasons, such as the fact that the global economy was still recovering from the effects of the 2008/9 financial crisis.

“Secondly, it will also be extremely difficult to achieve significant expansion and deepening of the local supplier base under the prevailing economic conditions,” he said.

Since the original APDP framework was developed in 2008 the global and domestic economy changed dramatically, raising a concern that there could be limitations in the program that may lead to failure to achieve set objectives for the industry

Davies said government remained committed to further development of the automotive industry in line with the National Industrial Policy Framework (NIPF) and the Industrial Policy Action Plan (IPAP).

The long-term development of the sector would be achieved through high vehicle production volumes and associated local value addition.

Therefore, in an effort to sustain and grow the automotive industry while steering it towards the APDP vision of high volume vehicle production, a number of proposals would be implemented:
– A post-APDP support framework would be developed during the course of 2016 to provide certainty in the policy environment for automotive manufacturing in South Africa after 2020;
– The volume threshold for vehicle production would be reduced from 50 000 units to 10 000 units a year to allow new entrants into the local industry from 2016;
– The Volume Assembly Allowance (VAA) would be offered on a sliding scale based on volume commencing at 10% for 10 000 units to 18% at 50 000 units from January 2016;
– A suitable capital incentive (AIS) level would be provided for new entrants at the less than 50 000 a year threshold (details would be captured in guidelines that should be finalised by April 2016);
– The production incentive for catalytic converters would be frozen at the 2017 level of 65% rather than continue the phase down;
– The qualification for component suppliers to earn APDP benefits would be tightened to avoid these benefits being earned on non-core automotive products and therefore preference would be afforded to those products that added value in the value chain; and
– The DTI would engage the National Treasury in an effort to secure improved investment support for tooling as a means of encouraging further component localisation. Overall national budget constraints were noted in this context.

Davies said the DTI would also engage the industry in efforts that sought to promote meaningful transformation.

“As we develop a post-APDP automotive master plan we will also actively engage the industry in efforts that seek to promote meaningful transformation of the industry through the inclusion of previously excluded groups along the entire automotive value chain. The current situation is characterised by extremely low participation of blacks in the automotive industry.

“This is prevalent through all parts of the sector’s value chain including distribution, retail, and after-sales/service. The levels of support afforded to the industry in SA need to be reflected through an appropriately transformed sector,” Davies said.

Details of the APDP were announced late in 2008, to replace the then autos sector specific programme, the Motor Industry Development Programme.

In February 2014 the DTI engaged the services of specialist advisor Roger Pitot to co-ordinate a review of the APDP with a mandate to make recommendations to secure optimal outcomes to the sector and economy while retaining long-term certainty for investment. The review was aimed at ensuring the APDP was working as intended, and fine-tuning where necessary.