Policy certainty to support automotive manufacturing growth

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

Policy certainty to support automotive manufacturing growth

PRODUCTIVE CAPACITY Sumitomo Dunlop has grown its local tyre production and capacity on the certainty created by original equipment manufacturers’ plans

The broad support for the Automotive Masterplan 2035 by companies across the value chain and the certainty that it creates supports local vehicle-manufacturing growth and, consequently, for the automotive components industry to increase supply, says Sumitomo Rubber South Africa (Sumitomo Dunlop) CEO and National Association of Automotive Component and Allied Manufacturers (NAACAM) VP Riaz Haffejee.

Major automotive manufacturers are expected to produce several new vehicle models in South Africa over the next few years. These types of projects are what original equipment manufacturers can do if supported by sufficient policy certainty, he adds.

With the involvement of industry bodies and their members, including NAACAM and the National Association of Automobile Manufacturers of South Africa (NAAMSA), policy certainty allows for decisions to be made with a high level of confidence. This, in turn, also impacts on supply chain partners who are better able to plan and invest for growth in demand.

“The quality and performance standards required by manufacturers are often higher than regulations and standards in countries, including South Africa, which drives the need to ensure that we have sufficient technical competencies in our companies and that we benchmark and continuously improve our manufacturing standards and efficiencies,” says Haffejee.

These pressures mean that the component industry has to keep up to date to protect its export markets.

“Working with the original equipment manufacturers, we can investigate export production potential into countries in support of their growth strategies.”

The local automotive component industry will benefit from new production models from automotive manufacturers on the back of the industry policy document. The global industry is expected to see fairly consistent growth until 2028, with new models expected during this period.

This multi-year visibility into planned future vehicles enables the industry to make good decisions, and Sumitomo Dunlop has grown its local tyre production and its production capacity based on the certainty created by the original equipment manufacturers’ plans.

However, the increase in production capacity is in contrast to the state of the South African economy and the consecutive three-year contraction of local demand. Sumitomo Dunlop expects negative growth to continue in the local tyre market over the next year or two, he says.

“Investments to boost local manufacturing are long-term considerations and not solely based on the availability of capital because they require that we train people to capacitate our operations properly.”

The priority for the local tyre industry, including importers, is to ensure that their cost structures are in line, identify profit opportunities and look to the future, concludes Haffejee.

Story highlights:

* Policy certainty supports local vehicle-manufacturing growth and increases demand for the automotive components industry.

* Investments to boost local manufacturing are long-term considerations and require that people are trained to capacitate manufacturing operations.