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Automotive trade performing strongly after pandemic

AIEC director and naamsa | The Automotive Business Council executive manager Dr Norman Lamprecht

AIEC director and naamsa | The Automotive Business Council executive manager Dr Norman Lamprecht

5th May 2023

By: Darren Parker

Creamer Media Contributing Editor Online

     

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Although the domestic automotive industry’s recovery to prepandemic levels continued in 2022, it was at a slower pace than in 2021, with many key performance indicators still remaining below the prepandemic levels, the 2023 Automotive Export Manual publication released by the Automotive Industry Export Council (AIEC) on May 5, shows.

The manual, which was authored by AIEC director and naamsa | The Automotive Business Council executive manager Dr Norman Lamprecht, states that, in terms of trade, however, the industry reflected a sound performance.

The export value of vehicles and automotive components increased by R19.8-billion, or 9.5%, from R207.5-billion in 2021 to a record R227.3-billion in 2022, comprising 12.4% of total South African exports.

Vehicle exports increased by 53 765 units to 351 785 units in 2022, up from 298 020 units exported in 2021, while the vehicle export value increased by R18.7-billion from R138.3-billion in 2021 to R157-billion in 2022 – the highest vehicle export value on record.

Automotive component exports reflected an increase of R1.1-billion from R69.2-billion in 2021 to a record R70.3-billion in 2022. The number of automotive industry export destinations in 2022 comprised 152 countries, similar to 2021, with the export value more than doubling in the case of 29 of these countries from 2021 to 2022.

Lamprecht says in the manual that, as the largest manufacturing sector in the country’s economy, a substantial 21.7% of value addition within the domestic manufacturing output was derived from vehicle and automotive component manufacturing in 2022, while the broader automotive industry’s contribution to the gross domestic product (GDP) comprised 4.9%, made up of 2.9% manufacturing and 2% retail.

South African automotive trade under the Automotive Production and Development Programme post-2020 (APDP2), amounting to R435-billion in 2022, comprised 16.5% of South Africa’s total trade GDP, up from 15.8% in 2021.

Lamprecht says the trading environment in South Africa is extremely competitive compared with global standards and that in 2022 there were no less than 43 passenger car brands and 2 513 model derivatives – the greatest selection of market-size ratio found globally.

Similarly, in the bakkie market segment, for the same period, there were 22 brands, with 498 model derivatives to choose from. Total new vehicle revenue, based on the available list price, amounted to R255.7-billion in 2022. Out of the top ten selling models in 2022, seven were South African-manufactured models, of which four were bakkies and three passenger cars.

New energy vehicle (NEV) sales reflected a significant year-on-year increase of 421.7% from 896 units in 2021 to 4 674 units by 15 brands in 2022.

Moreover, sales of battery electric vehicles breached the 500-units-a-year mark in South Africa for the first time ever, with sales of 502 units in 2022. However, despite the large increase, NEV sales still only comprised 0.88% of the total new vehicle market in 2022.

The manual showed that South African vehicle exports continued their upward momentum in 2022, despite a less supportive global economic environment. Vehicle exports registered an 18% increase of 53 765 units to 351 785 units in 2022, from the 298 020 units exported in 2021. These left- and right-hand-drive vehicles were exported to 110 countries last year. A significant 66.9% of light vehicle production was exported in 2022.

“There is a strong relationship between imports and exports in the South African automotive industry. Successful exporters have also been likely to import a significant portion of their inputs under the APDP and APDP2,” Lamprecht says.

In 2022, imports of light vehicles increased by 23.5% with an additional 61 519 units, up from the 262 281 units in 2021, to reach a total of 323 800 units originating from 23 countries. India was the top country of origin for passenger cars and bakkies imported into South Africa in 2022, with 165 910 vehicles, accounting for 51.2% of the total light vehicles imported. China moved into second place, accounting for 10.8% of imported vehicles.

The Automotive Export Manual showed that globally, the automotive industry remained under pressure last year owing to the ongoing semi-conductor shortage, as well as further shocks from the geopolitical conflict between Russia and the Ukraine. Predictions were that global vehicle production would decrease by at least one-million vehicles last year because of the conflict.

Further, the global semi-conductor shortage resulted in about 4.2-million fewer vehicles being produced in 2022, following a loss of about seven-million units globally the year before.

Although global vehicle production increased by 6% to reach 85.02-million vehicles in 2022, up from the 80.21-million units produced in 2021, it was still 7.7% below the pre-pandemic level of 92.12-million vehicles in 2019.

South African vehicle production increased by 11.8%, from 499 087 units produced in 2021 to 555 889 units produced in 2022, exceeding the global year-on-year increase in global vehicle production of 6%. The country’s global vehicle production market share therefore increased to 0.65%, but its global vehicle production ranking declined from 21st to 22nd, as Malaysia, ranked at number 20, surpassed South Africa in the global rankings.

In terms of global bakkie production, South Africa was ranked sixteenth globally, with a market share of 1.1%. South Africa remained the dominant market on the African continent, and accounted for 555 889 vehicles, or 54.4% of the total African vehicle production of more than one-million vehicles in 2022.

In 2022, global new-vehicle sales declined by 1.4% to 81.6-million units and were also still 10.6% below the prepandemic level of 2019.

Lamprecht notes that China remained by far the largest single-country new-vehicle market in the world, selling almost as many vehicles as in the European and US markets combined. New vehicle sales in China grew by 2.1% year-on-year in 2022 to 26.86-million units. Internal combustion engine (ICE) vehicle sales continued to decline but NEV sales accelerated in major markets, reaching a further record in 2022 with 10.5-million vehicles sold, an increase of 55% compared with 2021.

“As the race to full electrification continues, China, Europe and the US accounted for about 95% of the global electric vehicle sales,” Lamprecht says.

The European Union (EU) and the UK, as a bloc, remained South Africa’s largest export region in 2022, accounting for R133.2-billion, or 58.6%, of total automotive exports of R227.3-billion in 2022.

However, both the UK and the EU have announced a ban on the sale of new ICE vehicles from 2030 and 2035, respectively. Considering that 45.4% of the total automotive component export value, and the fact that three out of every four vehicles exported were destined for the EU and the UK last year, developments in the region will continue to have a measurable and direct impact on the South African automotive industry.

Africa represented the domestic automotive industry’s second largest export region, with exports amounting to R34.9-billion, of which 86.2% comprised exports to neighbouring countries in the Southern African Development Community, which is a free trade area.

According to the new AIEC manual, the reach with respect to the number of destinations of vehicles and automotive component exports from South Africa remains high.

Last year, the top export destinations for domestically manufactured vehicles and automotive components remained markets in the Eurozone, as well as the US. However, Lamprecht says that diversification into new emerging markets is a continuing trend and underlines the automotive industry’s competitiveness drive and the continuous widening of the country’s traditional trading base.

Major markets such as Brazil, Singapore, Philippines and Indonesia counted under the 29 countries to which the automotive export values more than doubled on a year-on-year basis in 2022.

Last year, automotive component exports increased by 1.6% to a record R70.3-billion, up from R69.2-billion in 2021. Catalytic converters remained the top automotive component exported from South Africa and comprised 48.3% of total automotive component exports, followed by engine parts, tyres and radiators and parts.

Germany and other developed markets remain the South African automotive industry’s top export destinations for component exports over the past three decades.

Components made by the seven original-equipment manufacturers (OEMs) in South Africa increased by R9.5-billion, or 8.6%, to R119.6-billion in 2022, up from R110.1-billion in 2021. This was in line with the 11.4% year-on-year vehicle production increase in 2022, Lamprecht says, noting the launches of several new domestically manufactured models.

In 2022, a 15.9% increase in the import of replacement parts amounted to an added R10.88-billion, taking the total to R79.19-billion, up from R68.31-billion a year before.

“The proliferation of light vehicle aftermarket parts is driven by factors such as the growth of vehicle imports, increasing vehicle age, advancing vehicle technology, and economic pressures on consumers,” Lamprecht says.

He says the global automotive industry is currently at an important crossroads. OEMs will need to accelerate the development of a new NEV business, while simultaneously running the legacy ICE vehicle business. To achieve this business-model duality, OEMs, as well as their component suppliers, will need to make dramatic changes and fundamentally reshape their business models, Lamprecht says.

“The imminent demand for eco-friendly vehicles in traditional markets means that the transition to NEVs is inevitable for the export-oriented domestic automotive industry, and it will need to start with making significant investments in innovation and NEV technology,” he says.

NEVs represent a significant ecosystem and, with the transition to eco-friendly vehicles, the domestic automotive industry’s collective success has never before been so closely tied to engagement with other sectors of the economy and across government.

“The future of the industry depends on all stakeholders, policy makers, businesses and consumers advancing to the same destination and thereby changing the way the world drives,” Lamprecht says.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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