SA’s carmakers need to embrace green revolution
BEFORE Covid-19, the African auto-mobility market was expected to grow steadily because of economic stability, a rising middle class, investments in infrastructure, and strong automotive policies developed to incentivise manufacturers.
Although the pandemic has somewhat derailed this prospect – with demand still lagging pre-Covid levels – the African market has one of the world’s highest growth prospects, steered by technological innovation and favourable transcontinental government policies.
However, to remain competitive, automotive businesses across the continent need to acknowledge the radically changing concept of vehicles. No longer in the realm of science fiction, next-generation vehicles will be “CASE”– connected, autonomous, shared and electric.
The markets for fuel-burning vehicles are shrinking rapidly while the green movement, accelerated by Covid-19, is stepping up. To avoid hampering growth and risk advancements, South African manufacturers and others on the continent must work tirelessly to keep up with the green revolution.
LOCALISING AUTO-MOBILITY IN SOUTH AFRICA
The road ahead for South Africa’s auto industry is not without speed bumps as it prepares for the vastly different auto-mobility landscape envisioned for the next 20 to 30 years.
Original equipment manufacturers (OEMs) have become cost-conscious and are rethinking their end-to-end supply chain for efficiencies and optimisations to remain competitive in the local, emerging and global markets.
Imports mainly consist of the components needed for domestically assembled commercial and passenger vehicle models, while demand for local content levels has declined. The long-established production of traditional, commodity-type products, such as plastic moulding and metal pressing, which represent a diminished share of automotive value addition, is partly to blame for the current situation.
In contrast, the output of high-value-added components such as electronics, telematics and powertrain technology from South Africa is extremely low, with the global semi-conductor shortage exerting additional strain on an OEM’s local and global annual production targets.
Localisation initiatives to strengthen domestic production represent a significant opportunity to transform the sector. During his keynote address at the recent Proudly South African Summit and Expo 2021, President Cyril Ramaphosa emphasised the importance of “buying local”. His remarks echoed the government’s Automotive Master Plan, which aims to increase localisation content from 39 percent to 60 percent by 2035.
In recent years, there has been significant investment to drive up productivity and employment within Sub-Saharan Africa and South Africa. In addition, South Africa’s seven auto industry OEMs are racing to revamp their production efficiency amid dwindling sales and exports because of the pandemic.
INCREASED CONNECTIVITY THROUGHOUT THE CONTINENT
Intra-African trade is expected to increase to 52 percent of the total trade by 2022 with the launch of the African Continental Free Trade Area in January. The agreement brings a new window of opportunity, with the free movement of labour and capital and more efficient supply chains that will unlock production capacity. An expected increase in transportation infrastructure investment will equally transform connectivity on the continent and aid the evolving automotive supply chain.
With its well-established manufacturing base and strong intra-continental connections, South Africa is particularly well positioned to reap the benefits. Similarly, large infrastructure projects, such as highways, railway lines, industrial corridors and hydroelectric dams earmarked for Tanzania, Kenya and South Africa could create lucrative contract opportunities for regional businesses.
DAWN OF A SUPER-SECTOR
Intelligent vehicle technology is a major disruptor in the auto-mobility hierarchy, surpassing more traditional elements such as chassis design, braking systems and tyres. Vehicles of the future will be autonomous and interactive, forcing OEMs and other participants to keep a close watch on the auto-mobility business model’s evolution. It is fast becoming a post-convergence industry that fuses hi-tech and auto-mobility into a new “super-sector”.
New players are entering the market to support the emerging era of hi-tech vehicles, OEMs are investing heavily in mega-plants in emerging markets, and production chains are moving closer to the customer. To survive, manufacturers must adapt and reorganise their current supply chains to prepare for the electro-mobility revolution.
Africa is urbanising faster than any other continent, but its adoption of electric vehicle (EV) technology falls well short of other countries. Contributing reasons include a high dependency on oil, weak charging infrastructure and the poor implementation of emissions regulations.
South Africa is home to about 180 charging stations, the highest on the continent. However, high taxes on EV imports – 25 percent versus 18 percent for internal combustion vehicles – hamper the adoption of electro-mobility, and plans are afoot to align import duties. Like Morocco and Egypt, the country is developing policies to increase the penetration of EV sales.
SERVICE SOLUTION
The pressures to achieve transformation, implement localisation, adopt new technologies and evolve supply chains are increasing, and much still needs to be done. A competent logistics provider can help to realise local auto-mobility companies’ global aspirations and access to new markets by setting up efficient solutions and supply chains to maintain operations quality, regardless of geographic location.
Teaming up with a global, end-toend logistics expert with local presence and knowledge will empower African businesses to leverage a vast network of resources, gain access to international markets and remain compliant. Partnerships like this play a vital role in stimulating economic growth and streamlining the operations of local enterprises. Expanding into a new market is a big step, but with the right logistics partner, it need not be a step into the unknown.