Vehicle industry on the road to growth

The South African motor industry improved its annual trade balance considerably last year through a combination of record exports and slower import growth. 

But is this the first surplus since the automotive policy was introduced more than 20 years ago?

A table in the 2016 Automotive Export Manual‚ produced by the Automotive Industry Export Council‚ calculates that vehicle and component manufacturers participating in the government’s incentive-driven Automotive Production and Development Programme (APDP)‚ posted a R5.3-billion surplus last year. This was achieved through R151.5-billion in exports‚ outweighing imports of R146.2-billion.

Record vehicle exports of 333082 cars and commercial vehicles earned R101.9-billion‚ while imported vehicles cost the country R61.6-billion.

The R40.3-billion surplus more than offset the R35-billion deficit for original equipment components: R84.6-billion of imports and R49.6-billion of exports.

However‚ the only imported components included are those destined for vehicle production lines. It does not take account of R50.5-billion in after-market spare parts brought into South Africa by imported car brands and local producers.

Critics of the components decision say after-market parts are a legitimate part of automotive trade and their absence distorts the picture. In the new annual‚ a second table includes them‚ turning the R5.3-billion surplus into a R45.2-billion deficit.

Including after-market parts‚ total automotive trade between South Africa and its global partners amounted to R348.2-billion. South Africa exported a record R151.5-billion of goods but imported R196.7-billion. The R45.2-billion deficit is a more than 27% improvement on the previous year’s R62.2-billion.

Since the 1995 launch of the Motor Industry Development Programme‚ succeeded in 2013 by the APDP‚ there has never previously been a surplus‚ with or without imported parts.

The APDP has brought R50-billion in investment and created about half-a-million jobs inside and beyond the motor industry.

Despite this‚ critics point to the trade deficits as evidence that the industry is a drain on the exchequer and that government support should be withdrawn.

Managing director of Nissan SA and president of the National Association of Automobile Manufacturers of SA Mike Whitfield said at the weekend he believed last year’s improvement was sustainable.

Vehicle exports were forecast to grow again this year‚ while local sales were expected to retreat for the third year in a row‚ possibly as much as 12%.

Since the middle of last year, Volkswagen‚ BMW‚ Ford and Beijing Automotive Industries have announced export-focused investment projects over the next four years‚ while Toyota has completed a R5-billion investment to launch its new Hilux.

President of the National Association of Automotive Components and Allied Manufacturers Dave Coffey said more investment announcements were expected soon.

Whitfield said the weak rand made South Africa an attractive production base. Increased localisation would benefit the industry’s trade balance. Though some firms claim more than 70% local content in their vehicles‚ the industry average is less than 50%.

Coffey said cooperative industry programmes identifying components best suited for localisation were going well.