South Africa would never become a low-cost vehicle producer, with “that space taken”, said National Association of Automobile Manufacturers of South Africa (Naamsa) president and Toyota South Africa Motors president and CEO Dr Johan van Zyl on Wednesday.

“Based on our history, this will never work. We will never be a cheap labour industry.”

Addressing the CAR Conference, held at the Johannesburg International Motor Show, Van Zyl compared South Africa’s production of metal pressings to that of India, noting that India produced it at a labour cost 222% cheaper than South Africa.

This meant, however, the country had “huge work” ahead of it to improve its cost competitiveness on other levels.

Van Zyl said South Africa’s automotive industry was not competitive enough, largely owing to low productivity, a strongly fluctuating rand, logistics costs, low local content on vehicles, low production volumes and an often negative mindset.

One of the ways to improve competitiveness was to increase the local parts on vehicles produced in South Africa.

Local content averaged 54% in 2012. This needed to increase to 70% for volume producers in South Africa, such as Toyota and Volkswagen, and 30% for premium car producers, such as BMW and Mercedes-Benz, said Van Zyl.

It made little sense for parts to be flown in from all around the world, only to export the completed vehicle.

“There is no reason to assemble vehicles here, if we do not have high local content. The logistics costs are too high.”

Van Zyl added that the recent seven-week strike in the automotive industry pointed to the collective bargaining process requiring structural reform, with all stakeholders currently looking at ways to achieve this.

He said a review of the collective bargaining process – which this year could not prevent a strike at assemblers, followed immediately by a strike at component makers – was necessary as it was “not very productive” to still have “50 items to talk about” after three months of negotiations.

Van Zyl said the review process was asking, for example, if arbitration should not be an option once it was clear that the parties disagreed. It might also be prudent to agree on what the consumer price index (inflation) was before negotiations start. 


“Do we need different CPIs for people in various income levels in South Africa?”

An initiative to source “local material at better prices”, would also serve as another boost to the competitiveness of South Africa’s automotive industry.

If it was possible, for example, for South African catalytic converter producers to buy platinum at a price cheaper than on the global market, “we could dominate this market, instead of having a 15% share”, said Van Zyl.

It would also aid the industry if the manufacturers of vehicle brands currently being imported into South Africa started local assembly.

“We need to encourage more manufacturers to assemble vehicles in South Africa,” noted Van Zyl.

He also highlighted a number of positives which were boosting the local industry’s competitiveness, such as a reduction in port costs, an increase in port capacity, and a R500-million investment by Transnet in building new automotive wagons for its railway lines, at around 14 a week.

“We are now on 180 new wagons.”

There had also been a stable policy framework for the automotive industry in South Africa in recent times, stable economic policy in general, and a continued investment flow from vehicle and vehicle manufacturers into South Africa.

It was the aim of the local industry and government to produce 1.2-million vehicle a year by 2020.

Around 540 000 vehicles were produced in 2012.

“Government is steering in the right direction, but all the rowers must row in the same direction,” emphasised Van Zyl.

In order to achieve the 1.2-million goal, total local vehicle sales would have to grow by roughly 7% a year every year – taking into account that only a portion of vehicles sold in South Africa are locally produced – with the export market to grow by 190%, from the current 277 000 vehicles a year, to 800 000 vehicles exported yearly.

“This is a challenging task, but we cannot give up on this. It is an important part of the industrialisation of the South African economy,” said Van Zyl.