Ingé Lamprecht­­­
2 minute read
13 Mar 2014
6:00 am

Automakers to invest R8 billion in 2014

Ingé Lamprecht­­­

South Africa's seven automotive manufacturers are expected to increase investment to close to R8 billion this year, despite a seven-week strike in 2013 that cost the economy about 58 000 units.

Picture: AFP

And another two original equipment manufacturers (OEMs) are lining up to open shop in South Africa, manufacturers say.

OEMs invested R4.3 billion in 2012 and R4.4 billion in 2013 on the back of incentive programs supplied by the Department of Trade and Industry (dti).

Since inception, the automotive investment scheme (AIS) has approved 181 projects, supported investment of more than R21 billion and facilitated the creation of a projected 9 500 jobs.

Speaking at the launch of KPMG’s Global Automotive Survey, Nico Vermeulen, director of the National Association of Automobile Manufacturers of South Africa (Naamsa), said the projected investment was a massive vote of confidence by multinational corporations in South Africa.

“It is not going to be an easy ride, because you are up against the very best in the world,” he said.

Vermeulen said despite the strike the automotive industry continues to perform well.

Production would have reached more than 600 000 units last year, but about 100 000 units were lost during the seven-week period. Some were recovered, but a net 58 000 units were lost to the detriment of the industry and the economy.

Challenges Remain

Vermeulen said a higher gross domestic product (GDP) growth rate would do wonders for the industry.

From 2004 to 2007, when the economy grew 4.5% to 5.5% per annum domestic sales volumes rose by between 15% and 20% year-on-year.

This was the type of growth needed to develop the critical mass for OEMs to produce and supply the local market, he said.

Vermeulen said, with recent exchange rate weakness, new vehicle price pressure has increased considerably.

Vermeulen said unfortunately that scenario has changed dramatically and new vehicle price increases are expected to be higher than the inflation rate this year, which will limit sales growth.

Moreover, the interest rate cycle has turned, he said.

Success Roadmap

Vermeulen said there isn’t one single factor that is needed to facilitate and realise the ambitious, annual production target of 1.2 million vehicles by 2020, but rather a whole range of interventions. If another one or two major OEMs use South Africa as a production platform to supply the local market as well as African and global markets, the target is within reach, he said.