R6.1bn in­vest­ment is Toy­ota SA’s big­gest to date Au­to­mo­tive in­vest­ment is com­ing in thick and fast, with Toy­ota SA’s size­able in­vest­ment a fur­ther in­di­ca­tion of the sec­tor’s long-term com­mit­ment to South Africa.

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con­tin­ued ev­i­dence of com­mit­ment to South Africa by the auto in­dus­try came in the form of Ja­panese car­maker Toy­ota’s re­cent R6.1bn in­vest­ment to up­grade fa­cil­i­ties at its Prospec­ton plant in Dur­ban to pro­duce the all-new Hilux and For­tuner mod­els for lo­cal and ex­port mar­kets. At R6.1bn it’s a smidgen over BMW’s R6bn in­vest­ment last year, but it got the Ja­panese car­maker a pres­i­den­tial ac­knowl­edge­ment, with Pres­i­dent Ja­cob Zuma pay­ing an of­fi­cial visit to Toy­ota SA’s pro­duc­tion plant at Prospec­ton.

Over the past five years, in­vest­ment in the sec­tor to­talled R26.4bn, ac­cord­ing to data from the Na­tional As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers of SA (Naamsa). This in­cludes R5bn from Mercedes-Benz, R3.6bn from Ford and R1bn from Gen­eral Mo­tors.

The au­to­mo­tive sec­tor is piv­otal to SA’s GDP and con­trib­utes nearly a third of the coun­try’s man­u­fac­tur­ing out­put.

New gen­er­a­tion model in­vest­ment is fun­da­men­tal to man­u­fac­tur­ing sus­tain­abil­ity as well as SA’s abil­ity to re­main glob­ally com­pet­i­tive in the sec­tor. Toy­ota South Africa Mo­tors (TSAM) is the largest au­tomaker in the coun­try with monthly sales of its mod­els av­er­ag­ing be­tween 8 000 and 11 000 units. It is the sec­ond-largest global man­u­fac­turer of Hilux and For­tuner and is the only fa­cil­ity charged with build­ing Hilux mod­els that meet the new Euro 6 reg­u­la­tory de­mands.

Toy­ota’s her­itage in South Africa spans more than 55 years and the com­pany has been the ben­e­fi­ciary of on­go­ing in­vest­ment since man­u­fac­tur­ing be­gan in 1972 at Prospec­ton. In­vest­ments have in­cluded a new ware­house fa­cil­ity in 2011, an SKD (semi-knocked-down assem­bly) op­er­a­tion for the Quan­tum taxi in 2012 and, in 2014, the new Hino Plant in­au­gu­ra­tion and the up­grad­ing of the Prospec­tion Plant to pro­duce the all-new Corolla and Corolla Quest.

But this R6.1bn in­vest­ment rep­re­sents Toy­ota’s sin­gle big­gest to date and in­creases pro­duc­tion ca­pac­ity for the Hilux and For­tuner at the Prospec­ton plant from 120 000 units an­nu­ally to 140 000. The Prospec­ton plant has the po­ten­tial to pro­duce around 235 000 ve­hi­cles each year, among these Toy­ota’s Corolla, Corolla Quest, Quan­tum and Hino mod­els.

Of the R6.1bn in­vest­ment, R1.9bn re­lates to sup­plier tool­ing, R1.4bn to in-house tool­ing with the re­main­ing in­vest­ment for in-house fa­cil­i­ties and build­ings to cater for the new press ma­chines.

In ad­di­tion to TSAM’s in­vest­ment of R6.1bn, Toy­ota’s sup­pli­ers have made sub­stan­tial in­vest­ments amount­ing to over R1.7bn specif­i­cally for the new Hilux and For­tuner project.

Around 2 000 new jobs in the sup­ply chain have been cre­ated. Apart from mod­erni­sa­tion of fa­cil­i­ties and pro­cesses, lo­cal­i­sa­tion has in­creased. Pre­vi­ous Hilux and For­tuner mod­els boasted around 1 500 lo­cal parts. That num­ber has now swelled to 2 700 for the new mod­els.

The much-loved tough Hilux bakkie and For­tuner SUV are core ve­hi­cles for Toy­ota lo­cally and con­trib­ute a size­able 80% of to­tal pro­duc­tion vol­ume. They are seg­ment sales lead­ers, lo­cal sales now ex­ceed­ing 1m ve­hi­cles.

Sales vol­umes for the Hilux – SA’s top-sell­ing model – are es­ti­mated at around 3 400 per month with the For­tuner fore­cast to achieve an av­er­age of 1 100 re­tail units monthly.

Half of TSAM’s work­force of 8 500 (ex­cludes dealer or com­po­nent sup­pli­ers) is ded­i­cated to pro­duc­ing just these two core mod­els.

In 2016 TSAM will ex­port more than 55 000 new Hilux and For­tuners to 74 coun­tries across Africa, Europe and Latin Amer­ica. That’s a tad over 50% of TSAM’s to­tal Hilux and For­tuner pro­duc­tion fore­cast for 2016.

The lo­cal car­maker will also be ex­port­ing new com­po­nents to Toy­ota Mo­tors Thai­land for use in its Hilux, For­tuner and In­nova pro­duc­tion fa­cil­i­ties. This too will add sig­nif­i­cant value to the lo­cal sup­ply chain as well as in­crease ex­port value and sig­nif­i­cance for TSAM.

‘Rules of en­gage­ment’

Speak­ing at the launch, Dr Jo­han van Zyl, chair­man of Toy­ota South Africa and chief man­ag­ing of­fi­cer of Toy­ota Mo­tors Europe, urged par­ties ahead of this year’s wage ne­go­ti­a­tions to avoid strike ac­tion. The in­dus­try lost 34 pro­duc­tion days dur­ing the pre­vi­ous multi-year ne­go­ti­a­tions in 2014.

“We have to re­main world com­pet­i­tive not only in terms of wages and pro­duc­tiv­ity, but also re­gard­ing labour sta­bil­ity. I can­not stress enough the im­por­tance of en­gage­ment – en­gage, en­gage and en­gage again – the need to em­ploy dis­pute res­o­lu­tion as the first and ul­ti­mately only line of de­fense rather than re­sort­ing to strike ac­tion as the so­lu­tion,” said Van Zyl.

He ap­peared con­fi­dent that a fair and eq­ui­table labour agree­ment could be reached.

While the coun­try’s mo­tor in­dus­try has shown sub­stan­tial growth in pro­duc­tion and ex­ports post 1994, SA cur­rently pro­duces less than 1% of the 90m ve­hi­cles made world­wide each year, he said.

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