Big bucks for SA’s auto sector

The National Association of Automobile Manufacturers of South Africa (Naamsa) is anticipating another very good year of capital investment commitments by automotive original equipment manufacturers (OEMs) in South Africa.

Naamsa chief executive Mikel Mabasa said this week it is anticipating that a number of automotive OEMs will be considering capital investment projects in South Africa this year.

“I don’t want to steal their thunder but there is a major Chinese company, which is going to produce heavy commercial vehicles in the country this year,” he said.

Record year

Mabasa’s comments follow Naamsa this week releasing its quarterly review of business conditions in the new vehicle manufacturing industry, which revealed that total capital expenditure by the major vehicle manufacturers reached its highest level on record at R9.2 billion in 2020.

“The continued high levels of capital expenditure are due to investment projects by manufacturers in terms of the Automotive Production and Development Programme, which are normally spread over multiple years and linked to higher levels of production for export markets,” he said.

Mabasa said the industry had started 2021 “very powerfully” from an investment perspective, particularly in view of the very difficult economic conditions and climate South Africa finds itself in.

This is a reference to the announcement this month that R20.13 billion is to be invested in South Africa by the Ford Motor Company and its suppliers for the production of the new Ranger and a bakkie for Volkswagen at Ford’s assembly plant in Silverton in Pretoria and the adjacent Tshwane Automotive Special Economic Zone as well as Toyota South Africa Motors announcing the investment of almost R3 billion for the production of the new Corolla Cross sport utility vehicle at its manufacturing plant in Prospecton in Durban.

Other investment activity

Minister of International Relations and Cooperation Dr Naledi Pandor said during the State of the Nation Address debate that Isuzu, Tata Motors, Mahindra Motherson Sumi and Toyota had expanded their investments in South Africa.

Mabasa said there are more OEMs, other than those mentioned in parliament, that are definitely considering some capital investment projects this year.

Naamsa’s quarterly business review said annual capital investment by independent vehicle importers at their head offices and dedicated dealerships increased to R52.4 million in 2020 from R11.8 million in 2019.

Confidence

The review said despite a much-improved performance during the fourth quarter of 2020, the CEOs generally regarded the prevailing domestic automotive industry business conditions during the fourth quarter as still unsatisfactory compared to the corresponding quarter of 2019.

However, the sentiment expressed by the Naamsa CEOs related to automotive business conditions over the next six months “is one of cautious optimism”.