The nearly 100% decline in April new-vehicle sales and export figures serves as barometer of the impact of Covid-19 on the domestic automotive industry and the economy at large, says National Association of Automobile Manufacturers of South Africa and Automotive Industry Export Council executive manager Dr Norman Lamprecht.
“However, the bedrock of South Africa’s manufacturing sector, vehicle and automotive component production, which eased ease back into production as of May 4, remain imperative to the country’s economic fortunes.”
Despite already facing domestic and foreign economic headwinds last year, the domestic automotive industry once again excelled on the export side, he notes, as illustrated in newly released 2020 Automotive Export Manual.
Several new export records in 2019 compensated to a large extent for the progressive decline in the domestic new-vehicle market witnessed over the past six years.
The manual notes that the export value of vehicles and automotive components comprised a record R201.7-billion, equating to 15.5% of South Africa’s total exports in 2019.
A record 387 125 vehicles, worth a record R148-billion, along with a record R53.7-billion in automotive components, were exported to 151 countries last year, says Lamprecht.
From 2018 to 2019, the total export values more than doubled in the case of 19 countries.
The broader automotive industry’s contribution to gross domestic product last year reached 6.4% (4% manufacturing and 2.4% retail).
As the largest manufacturing sector in the country, a substantial 27.6% of value addition within domestic manufacturing output was derived from vehicle and automotive component manufacturing activity, positioning the industry and its broader value chain as a key player within South Africa’s industrialisation landscape, says Lamprecht.
The domestic automotive industry’s top export markets in value terms in 2019 were Germany, at R75.5-billion, followed by Belgium, the UK and the US.
The UK, with 101 401 vehicles, was once again South Africa’s top destination for vehicle exports in 2019.
Volkswagen Group South Africa, with its Polo model, topped the country’s export rankings last year.
South Africa remains a strategic supplier of catalytic converters to the world, and by value, this component category maintained its dominant export position in 2019, as exporters tend to focus on high-value, locally beneficiated, logistics-friendly automotive components, says Lamprecht.
The trade arrangements that South Africa enjoy with the European Union (EU), allowing for duty-free vehicle and automotive component exports to the 28 countries in the region, as well as the African Growth and Opportunity Act trade arrangement with the US, enhanced exports to those countries, he adds.
The EU, with exports of R129.7-billion, or 64.3% of the total export value of R201.7-billion, was the domestic automotive industry’s main export region last year.
Africa was the industry’s second-largest export region, with an export value of R31.9-billion, or 15.8% of the industry’s total export value.
The African Continental Free Trade Area, planned to be implemented on July 1, could unlock many opportunities for South Africa in expanding regional integration into the continent, says Lamprecht.
This is especially true considering the fact that 84.3% of the country’s automotive exports into Africa were destined for Southern African Development Community, he adds.
Imports from India
On the import side, the top country of origin for vehicle imports last year was again India, with 106 199 units, or 36.5% of total passenger car and light commercial vehicles (LCVs) imported.
India is a global production hub for entry-level and small vehicles, which currently comprise the bulk of new-vehicle sales in the South African market.
Volkswagen’s Polo Vivo is the only vehicle in these segments manufactured in South Africa.
The value of vehicle imports from Germany, which include most premium brands, was, however, almost 50% higher compared with those imported from India.
Original equipment (OE) component imports by South Africa’s seven vehicle manufacturers increased to R106.8-billion in 2019, up by R9-billion, or 9.2%, from the R97.8-billion in 2018, which is in line with the industry’s record vehicle production volume last year, driven by record vehicle export volumes, says Lamprecht.
Germany, Thailand, Japan, the US and China represented the main countries of origin for these components.
High value, capital-intensive componentry, such as the powertrain and telematics, which collectively account for about 50% to 60% of the value in a modern vehicle, are mainly imported into South Africa, with the remainder sourced in the domestic market, highlights Lamprecht.
Made in SA
South Africa has one of the most competitive trading environments in the world, and in 2019 offered consumers a choice between 46 passenger car brands and 2 507 model derivatives, the widest choice of new-cars-to-market-size ratio in the world, says Lamprecht.
Nine of the top-ten selling vehicles in 2019 were South African-built passenger cars and LCVs.
The Toyota Hilux, with 40 934 units, was the most popular model sold in the country last year, followed by 29 681 units by the top-selling passenger car, the Volkswagen Polo Vivo.
An interesting phenomenon is that South African motorists are more inclined to drive bakkies, which have both commercial and leisure vehicle applications, than passenger cars, notes Lamprecht.
Market Share Up
South Africa’s global vehicle production ranking remained at 22nd last year, although its market share improved from 0.64% to 0.69% owing to record production of 631 983 vehicles, driven by the industry’s record vehicle export performance.
In terms of global LCV production, South Africa was ranked 14th with a market share of 1.25% in 2019.
South Africa remained the dominant market on the African continent and accounted for 57.2% of total African vehicle production of 1.12-million vehicles.
South Africa is highly exposed to economic conditions in China and the world economy in general, and the Covid-19 pandemic will stifle export-oriented industries and manufacturing in the foreseeable future, says Lamprecht.
“South African exporting companies will be required to consider various scenarios for the world economy and global trade patterns in the short to medium term.
“The global automotive industry is currently experiencing unprecedented challenges due to the global lockdowns implemented across all the major automotive manufacturing hubs to flatten the Covid-19 curve, and South Africa is no exception to this.”
Lamprecht adds that the development of connected cars and autonomous driving might just be accelerated as a result of the pandemic.