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.
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.