Revved up

CityPress - - Business -

Aweak rand brings mixed bless­ings to the mo­tor sec­tor. While car mak­ers across the coun­try are mak­ing the most of gov­ern­ment’s ex­port­fo­cused automotive pro­duc­tion de­vel­op­ment pro­gramme to raise last year’s ex­ports of 277 000 ve­hi­cles to an ex­pected 325 000 this year, lit­tle of that growth comes im­me­di­ately from the fall­ing cur­rency that makes cars cheaper in for­eign show­rooms.

The cur­rent ex­port suc­cess re­sults from con­tracts and tar­gets agreed to years in ad­vance, although rel­a­tively cheaper prices can build good­will for the fu­ture.

Nico Ver­meulen, di­rec­tor of the Na­tional As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers of SA, said MercedesBenz’s ex­port of its C-Class model to for­eign des­ti­na­tions is fol­lowed by BMW, which sells in the US, and VW, which goes to Euro­pean out­lets.

Ford’s Ranger, Toy­ota’s Hilux and Gen­eral Mo­tors aim to open up African mar­kets and are also push­ing up the ex­port num­bers.

This year, ex­ports have be­come more im­por­tant as lo­cal de­mand has shrunk by about 6%.

Since as much as one-third of the com­po­nents and ma­te­ri­als in lo­cally man­u­fac­tured ve­hi­cles are im­ported, the weaker cur­rency means they be­come more ex­pen­sive, negat­ing the rel­a­tive cheap­ness of lo­cal parts. But lo­cal pro­duc­ers of automotive parts can ex­pect a fil­lip in ex­port sales if the rand stays in the low teens or declines. Buy­ers of im­ported ve­hi­cles can ex­pect prices to rise later in the year.

Arno van der Merwe, chief ex­ec­u­tive and ex­ec­u­tive di­rec­tor of man­u­fac­tur­ing for Mercedes-Benz SA, said they ex­pected the lo­cal de­mand de­cline to con­tinue for some time, in line with other emerg­ing mar­kets.

“We’ve posted record ex­port num­bers and look for­ward to the trend con­tin­u­ing. The wider ge­o­graph­i­cal ex­po­sure through this flex­i­ble pro­duc­tion net­work also mit­i­gates the im­pact of lo­cal or re­gional cycli­cal eco­nomic con­di­tions on our over­all busi­ness. On bal­ance, the cur­rent ex­change rate re­al­i­ties also sup­port the ex­port busi­ness,” he said.

– Peter De Ionno

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