Automotive industry transformation focused on future of mobility

27th March 2020 By: Schalk Burger - Creamer Media Senior Contributing Editor

Automotive industry transformation focused on future of mobility

MIKE MABASA There is significant scope for cooperation on skills development, value-chain transformation and supplier development to ensure the sustainability of the automotive industry

Automotive industry transformation initiatives, as captured in the Automotive Masterplan 2035, are aimed at radically transforming the industry to meet the future demands of human mobility, in addition to sustaining and growing the industry’s economic outputs and associated socioeconomic benefits, says National Association of Automobile Manufacturers of South Africa (NAAMSA) CEO Mike Mabasa.

The automotive industry is transforming globally, and South Africa can capture the economic potential of these changes if it prepares and transforms its industry.

“There are significant opportunities to grow our exports and simultaneously widen and deepen the localisation of automotive component manufacturing and automotive manufacturing. The global nature of the automotive industry, however, does require that we do so in an orderly manner to attract investment, and sustain and grow our local industries,” he explains.

To this end, the newly established Automotive Industry Transformation Fund is aimed at enabling those who aspire to own businesses in the supply chain to own dealerships and repair operations, as well as component manufacturing, materials and fluids businesses. However, such ownership will materialise only if aspirants have the requisite experience and skills to meet the exacting standards of the industry, including protecting the health and lives of people.

“There is also a continuing and sustained focus on skills development and the upskilling of youth and women to draw them into the industry. This is not only to transform the economy of South Africa, but also meet the new skills requirements of the industry.”

Such skills include those needed to make and maintain electric vehicles, and information and communication technology skills required for increasingly connected vehicles.

“Vehicles these days are computers on wheels. South Africa has more technicians than mechanics working in the automotive industry, as an example,” he adds.

Further, the automotive industry has acknowledged the imperative of transforming across all levels of the supply chain and is committed to supporting transformation to scale up the impact of the industry's investment and initiatives. Transformation is a business imperative and NAAMSA expects to see it to accelerate over the next few years, says Mabasa.

There is significant scope for component and automotive manufacturers to cooperate – which does not inhibit competition – on aspects such as skills development, value-chain transformation and support for supplier development in recognition of the need to ensure the sustainability of the industry.

“If we have the necessary specialised skills, the new capacity and transformation of the automotive industry will afford South Africa a better chance to attract investment in conventional and new propulsion technologies.”

Collaboration will magnify the impact of investments, which are typically done individually by companies, and bolster the ability of the industry to pursue new strategic directions.

Component and automobile manufacturers are being driven to improve their ability to innovate and develop new ways of adding value and changing revenue models to prepare for the vastly different mobility landscape envisioned within the next 20 to 30 years.

However, Mabasa warns that power supply problems are hampering the production of components and automobiles, and that several companies in the industry are investigating alternative sources of energy to power their operations.

“The economic and infrastructure problems in South Africa impact negatively on the industry’s ability to innovate, as it has to grapple with these risks, rather than advance the important issues of transformation and development sustainability.”

The Automotive Masterplan 2035 also aims to improve the localisation content from 39% to 60% in vehicles manufactured and, thereby, ensure that the industry can support the local component manufacturing sector.

Industry associations NAAMSA and the National Association of Automotive Component and Allied Manufacturers (NAACAM) are working with automotive original-equipment manufacturers to ambitiously increase the local-content threshold and identify which components can sustainably be localised.

Economies of scale are of paramount importance in the industry to ensure its competitiveness. This does constrain the potential development of local suppliers, owing to the quantities and quality of components that must be produced.

However, producing components for the aftermarket and for export can help to provide sufficient baseline demand and the economic fundamentals necessary to support development of suppliers and, thereby, improve the financial metrics to garner investment in productive capacity, concludes Mabasa.

Story highlights:

* The automotive industry is transforming globally and greater localisation must be orderly and sustainable, as well as preceded and accompanied by skills development.

* Collaboration will magnify the impact of investments and help the industry to pursue new strategic directions.