Automotive sector’s success could press case for release from lockdown
New automotive trade figures might intensify recent calls for the government to hasten the release of the local motor industry from Covid-19 lockdown.
Vehicle and components manufacturers achieved a record R27.1bn trade surplus in 2019 — 61% higher than the previous year’s R16.8bn. Exports rose 12.8% to R201.7bn, while imports grew 7.8% to R174.6bn.
Most of the export growth came from vehicle producers, who delivered a record 387,125 vehicles — more than 60% of local industry production — worth R148bn to foreign markets. Components suppliers also outdid previous efforts by exporting R53.7bn of parts.
The figures are contained in the 2020 export manual of the Automotive Industry Export Council, published on Thursday.
Global effects of the Covid-19 pandemic will render an immediate repeat performance impossible, but Norman Lamprecht, chief author of the accompanying report, says this should not undermine the industry’s importance to the SA economy.
The report says automotive accounted for 15% of SA export earnings in 2019 and is responsible for 30% of the value of all manufacturing in the country.
“As the bedrock of SA’s manufacturing sector, vehicle and automotive component production remains imperative to SA’s economic fortunes,” Lamprecht said.
Had the government stuck to its original plans for easing the Covid-19 lockdown, vehicle and components factories would still be mothballed.
Most companies, however, started going back to work last week, after warnings that the industry could suffer irreparable damage if it was unable to service export orders once overseas demand starts to recover.
Thomas Schaefer, MD of Volkswagen SA (VWSA), said his Uitenhage vehicle assembly plant, in the Eastern Cape, was meeting “incredible” export demand before Covid-19 struck.
The plant, which exports two-thirds of its Polo and Vivo production, started with a single daily shift last week but Schaefer was looking forward to ramping back up to three once the government eased restrictions.
Despite losing production of about 16,000 vehicles during the lockdown, he hoped export demand could push full-year production to 140,000, compared to 162,000 in 2019.
VWSA’s main export destination is the UK, which in 2019 bought more than 25% of all vehicles exported by the SA motor industry.
UK new-car sales fell by 97% in April but David Leggett, automotive analyst at the GlobalData consultancy, believes it is ready to bounce back. “Demand will take time to recover to near normal but more sales are expected to come through in the coming months as the government eases lockdown restrictions and reopens the economy, he said.
UK demand for SA vehicles dwarfs that of other ”countries. The export manual shows that in 2019 it bought 101,401 — far ahead of runners-up Germany (37,152) and Japan (33,435).
The biggest source of vehicles imported into SA was India. Of the 290,624 light vehicles imported here in 2019, India was responsible for 106,199, followed by Germany (36,759), Japan (34,351) and South Korea (26,828).
Germany, however, remained by far SA’s biggest automotive trading partner. At R134.7bn, two-way trade between the countries was more than four times the size of that with second-placed Japan, worth R29.9bn. SA exports to Germany were worth R71.6bn, and imports R63.1bn.
That export figure also made Germany the biggest value destination for SA products. Next was Belgium, which bought R18.5bn of vehicles and components, followed by the UK (R17.9bn), US (R10.3bn) and Spain (R8bn).
In all, the SA motor industry exported products to more than 150 countries and territories around the world in 2019.
The overall trade surplus, though welcome, once again highlighted the industry’s imbalance. Vehicle exports of R148bn trumped imports of R64bn, but components exports of R53.7bn were more than cancelled out by imports of R110.6bn — a R56.9bn deficit.
The industry remains confident the components gap will be whittled away by the government’s 2021-2035 Automotive Masterplan, which aims to increase average local content in SA-made vehicles by 50%.
However, with the launch of the masterplan likely to be delayed by at least six months because of Covid-19, targets will not get any easier.
In 2019, SA produced 631,983 vehicles, 0.69% of the global total of 91.8-million, ranking it 22nd in the world.