Scheme to lift truck production
FURTHER discussions are planned between the automotive industry and the government despite Trade and Industry Minister Rob Davies’s approval of the new medium and heavy commercial vehicles automotive scheme (MHCVAIS) guidelines.
The objective is to stimulate investment in the production of medium and heavy commercial vehicles in South Africa.
Davies approved the guidelines on November 11 but his decision was only announced yesterday. He said the broadening of the scope of the Automotive Investment Scheme (AIS) to include medium and heavy commercial vehicle manufacturers was in line with the broader objectives of the programme and the vision for the automotive industry to 2020.
“The medium and heavy commercial vehicles sector value chains are highly underdeveloped and there are opportunities to deepen their value addition and potential for employment creation.”
Indications from the industry are that the policy direction and approach of the MHCV-AIS was not yet cast in stone, particularly a requirement that manufacturers would from March 2016 have to assemble or trim the cab locally to qualify for any of the incentives.
Frank Beeton, a consultant to Econometrix, said there was a feeling that cab assembly was not viable but only a financial exercise by the manufacturer would be able to determine whether the benefit of the incentive made it worthwhile to financially incur the additional cost of investing in a local cab assembly facility.
Nico Vermeulen, the director of the National Association of Automobile Manufacturers of SA, said the medium and heavy truck and bus industry supported the AIS incentives as the mechanism to drive the value addition, additional localisation and employment creation in the domestic bus and truck industry.
He said the industry was in discussions with the Trade and Industry Department on the AIS guidelines and had made proposals that were likely to be the subject of further discussions. These would focus on “technical and definitional matters” and the industry was planning to have a meeting with the department in January.
Vermeulen was unaware of any manufacturers that were waiting for the finalisation of these incentives before invest- ing in the country but indicated that both Iveco and FAW Group had recently made investments in the country.
Beeton said the MHCV-AIS was not a local content programme but only an incentive for new investment in vehicle assembly or component manufacturing activities.
He stressed there were not any additional penalties for manufacturers and importers who elected to continue importing vehicles in completely built-up condition.
That locally assembled and imported vehicles competed in the domestic market also suggested the present level of import duties imposed on imported vehicles were not unduly punitive, he said.
The scheme provides for a non-taxable cash grant of 20 percent of the value of qualifying investment in productive assets by medium and heavy commercial vehicle manufacturers and 25 percent of the value of qualifying investment in productive assets by component manufacturers and tooling companies for MHCV’s as approved by the department.
An additional non-taxable cash grant of between 5 percent or 10 percent may be available to projects that are found to be strategic by the department.
The cab may only be imported in an assembled or trimmed condition into South Africa until March 31, 2016.
Projects will be evaluated according to a number of economic benefit requirements, including value addition, employment creation/retention and strengthening of the automotive supply chain.