Investments of R10bn in production/spares will help reach m/vehicle target
THE PRODUCTION target of 1m vehicles/year may again become the key motivator for South Africa’s automotive industry less than two years after Volkswagen SA head David Powell’s sobering address at the Port Elizabeth Automotive Week, when he warned of the demise of local car makers.
Over the past 18 months almost all of SA’s major car manufacturers – including VWSA – have announced investments in their production and distribution facilities to the collective value of almost R10bn. The most recent is Toyota South Africa, which last week voiced plans to build a R363m parts and distribution outlet east of Johannesburg that will serve 56 countries in Africa and Europe and is expected to have a turnover of R3bn, with 20% of that coming from exports.
“The 1m production target is ambitious but we shouldn’t give up on it,” says Toyota SA head Johan van Zyl. “Manufacturers have adjusted to the change in local demand. Now we need to increase our exports.”
Tony Twine, senior economist at Econometrix, says the target is still a possibility – the key obstacle being the slowdown in global demand. He added SA has nonetheless managed to sharply rebound exports by 35% last year, despite the still sluggish economic conditions in many major export destinations.
The catalyst behind the billions being poured into production capacity in SA has been Government’s Automotive Production and Development Plan, which officially comes into play in 2013 and will offer incentives to vehicle manufacturers to invest in SA instead of the alternative burgeoning markets in South America and the East.
The recovery in vehicle sales has also served to boost the confidence of producers, particularly the forecasts for sales this year. Last year’s growth rate in sales of 24,7% looks impressive at first glance but in effect only brings the total number of units sold – 492 956 – to a level just beneath the total unit sales in 2008, when the industry declined by 21%.
McCarthy’s outgoing CEO Brand Pretorius sees an increase in sales of 11,6%, while others – such as the Retail Motor Industry Organisation’s CEO Jeff Osborne – are even more upbeat, with a sales forecast of a minimum of 13% growth for the year.
But the real challenge for 2011 is whether the industry will be able to increase jobs, and any move closer to that 1m target and higher sales would help. Pretorius says exports would need to be upped by an additional 25% and domestic sales by 10% to see any meaningful increase.