The South African motor industry must more than double current vehicle production volumes if it expects to ever become self-sufficient‚ says Volkswagen SA (VWSA) managing director Thomas Schaefer.
The industry expects to build a record 610000 cars and commercial vehicles this year‚ rising to 652000 in 2016 as exports continue to improve.
The existing record – 587719 – was set in 2006.
While the industry is understandably pleased with its progress‚ the fact remains that it accounts for less than 0.6% of global production‚ Schaefer says.
To be considered internationally “significant”‚ it needed to build at least one million vehicles annually. And to be self-sufficient – not reliant on government incentives and subsidies to attract investment – it should aim for 1.5 million.
Schaefer announced last week that VW in Germany would invest at least R4.5-billion over the next two years to build new car models at its SA subsidiary’s Uitenhage assembly plant.
The investment will increase VWSA annual production capacity from about 120000 to 150000. Just as important‚ says Schaefer‚ it will allow the company to increase local content in its vehicles to a possible 80% from 72%.
Of the planned spend‚ R3-billion will go to the plant and R1.5-billion is earmarked for the development of SA-based components suppliers.
Local content is calculated on SA contribution to vehicles’ ex-factory price. The formula includes energy‚ manufacturing costs and labour.
The biggest contributor‚ however‚ is components.
Local content in some SA-made vehicles is as low as 30% because companies find it cheaper to import from their multinational parents’ global suppliers that produce parts by the million‚ rather than the low volumes – and concomitant high unit costs – to which some SA suppliers are limited.
That’s why Schaefer says SA should set its production sights higher. In launching the 2013-20 automotive production and development programme (APDP)‚ government officials hoped it would raise production to 1.2 million by the end of the period.
While only the delusional still believe the timeframe is achievable‚ the number remains a target. Schaefer says that in the longer term‚ SA should look for at least 1.5 million and possibly two million. Then the industry will have the necessary numbers to justify full localisation of supply.
As things stand‚ he says‚ the 80% VWSA hopes to achieve with its next products is probably as high as it is possible for any company to go.
Schaefer says VWSA will build at least two new vehicles‚ and possibly a third. VW Germany will probably decide within weeks‚ though an announcement may be delayed until year-end. — BDLive