Buying a new vehicle is the second-most important purchase for many South Africans; but new-vehicle sales have declined over the past five years and remain under pressure, says National Association of Automobile Manufacturers of South Africa (Naamsa) CEO Michael Mabasa.
Continuing its downward trend in the first half of the year, the domestic market for new vehicles is down 3.7% on the previous corresponding period, owing to load-shedding and low consumer confidence before the country’s general elections in May.
“The slowdown in the global economy, declines in business and consumer confidence, and growing pressure on households’ disposable income are some of the factors that impact on consumer behaviour,” Mabasa tells Engineering News, adding that the underlying demand conditions for new vehicles locally remain weak, limiting the possibility of sustained recovery in future output.
However, South Africa’s manufacturing output is set to rebound in the second quarter of this year amid improved post-election stability in the political and economic environment following the elections, an anticipated higher contribution by the car rental industry during the second half of the year, as well as the modest recovery of the country’s gross domestic product (GDP) growth rate compared with that of 2018.
There is a close correlation between new-vehicle sales, as a leading economic indicator and the country’s GDP growth rate, he tells Engineering News. The South African automotive industry contributes 6.9% to the country’s GDP – 4.4% through manufacturing and 2.5% through retail.
Further, this year’s vehicle-export growth trajectory continues to strongly support higher vehicle production and automotive component supply levels, explains Mabasa.
In the first half of the year, vehicle exports accounted for nearly 30 000 units, or 19.3%.
“This is up on the 2018 corresponding period and on track for a further new [vehicle production] record of about 400 000 vehicles in 2019,” he says.
Emphasis on Growth
Naamsa’s long-term strategic objectives include increasing South African vehicle production to 1% of global output and increasing local content in South African assembled vehicles to up to 60%.
This supports the South African Automotive Masterplan 2035, through which South Africa aims to increase its vehicle production to 1.4-million vehicles a year by 2035.
In the next five years, the industry hopes to increase vehicle production from 600 000 units to 800 000 units and increase local content in vehicle assembly from 39.19% to 42%.
With about one-third of value addition in the domestic manufacturing sector derived directly or indirectly from vehicle assembly and automotive component manufacturing activity, the automotive industry, as well as its broader value chain, is positioned to be a key player in South Africa’s industrialisation landscape, Mabasa highlights.
In the long term, the association aims to double employment in the automotive value chain.
The manufacturing segment of the automotive industry presently employs about 110 000 people across its various tiers of activity – from component manufacturing to vehicle assembly. Consequently, owing to its multiplier effect, the automotive industry is responsible for about 457 000 jobs across the South African economy’s formal sector.
To facilitate growth in the automotive industry, Mabasa emphasises the need to improve competitiveness to attract new-vehicle assembly opportunities by addressing the efficiency and cost of production by potentially partnering with parastatals.
“The global nature of the automotive industry requires the profitable and timely delivery of high-quality products at competitive international prices. Failure to do so will ultimately force multinational automotive corporations to locate elsewhere,” says Mabasa.
He also emphasises the need to increase vehicle and automotive component exports into Africa, as well as pursue new trade partnerships with other vehicle assembly countries on the continent and regional integration opportunities through the Tripartite Free Trade Area and the African Continental Free Trade Area.
Further, he notes the importance of South Africa’s participation in the Brazil, Russia, India, China and South Africa (Brics) alignment; trade and investment opportunities and improved access into the Brics markets; as well as the need to expand the exporting of catalytic converters and platinum-group metal products such as fuel cells.
Further, Naamsa seeks to lead the transformation project of the South African automotive industry through the employment of more black South Africans, the upskilling of black employees, the empowerment of dealerships and authorised repair facilities, as well as substantially increasing the contribution of black-owned automotive component manufacturers within the automotive supply chain.
However, Naamsa’s objectives will only unlock opportunities that will deliver the long-term, sustainable development of the South African automotive industry through collaboration, Mabasa adds.
Consequently, he believes that the Naamsa Automotive Conference, which will be held at the Kyalami Grand Prix Circuit and Conference Centre, in Midrand, next month, is essential.
The conference will bring many key industry stakeholders together to share their insights and expertise to help the industry move forward, Mabasa concludes.
The Naamsa Automotive Conference, in association with business process services and software solutions provider Innovation Group and online automotive classifieds advertising website AutoTrader, is part of the annual Festival of Motoring presented by financial services provider WesBank.