The South African Auto Component Industry

1
The South African Auto Component Industry

• Presentation by Roger Pitot
• NAACAM

2
Structure of the Industry in SA - OEMs

• European vehicle manufacturers BMW,
  DaimlerChrysler and Volkswagen are all 100
  subsidiaries
• Japanese and other Multinational manufacturers,
  Ford, Nissan, General Motors and Toyota are now
  also 100 or majority controlled subsidiaries
• All other major marques are imported European
  (Fiat, Peugeot/Citroen, Renault), Japanese
  (Daihatsu, Honda, Subaru), Korean (GM/Daewoo,
  Hyundai, Kia), Indian (Tata, Mahindra), and
  several Chinese brands in 2007.

3
The Motor Industry Development Programme (MIDP)
Key Features

• Introduced 1995, extended to 2012, subject to
  review during 2006/7
• Duties progressively reducing to 25 CBU and 20
  components by 2012, from 115 and 50 in 1994
• Duty-Free import of components of 27 of
  ex-factory price of vehicles produced locally
• Import credits earned for exports, with benefits
  reducing - tradeable
• Productive Asset Allowance (PAA) for Investments
  duty credit of 20 over 5 years
• Minor programme for heavy trucks and buses

4
Future Direction of the MIDP

• Detailed review during 2006/7 focusing on
  investment and production support
• Ministerial assurances confirm government support
  through to 2020
• Review will take account of South Africas WTO
  obligations by replacing direct export subsidy
• Future policy will support enhanced investment
  and production in the South African auto
  industry, particularly local components

5
MIDP Industry Performance Since 1995

• Significant improvement in quality and
  productivity. Progressive economies of scale with
  local platforms down from 42 to 23
• Affordability New vehicle prices below
  inflation for 8 out of 11 years
• Large growth in industry exports and, in recent
  years, significant growth in domestic market
• Stable overall industry employment with modest
  growth in specific sectors
• Trade deficit has worsened in past two years due
  to stronger currency, higher vehicle imports

6
Car Sales History 1970 to 2006
7
Component Exports (R mil)
8
Component Export Destinations 2006

• Main destinations for SA component exports are
  the major first-world markets
• Germany 29
• Spain 11
• UK 9
• France 7
• Italy 2.2
• Total EU 72
• USA 10

9
Component Manufacturers Key 2006 Data

• The employment of the component manufacturers
  totals 79,000, growing at 1.5 annually
• Sales exceeded R56 billion (7 bn), with 47 OE,
  30 export, 23 aftermarket
• Capex was R2,2 billion
• Average local content of components exported was
  80
• Real Vehicle local content only 40
• 8 of the top 10 global manufacturers are invested
  in South Africa.

10
South Africa as a Sustainable, Low-Cost
Manufacturing Base

• World-class, low-cost infrastructure railways,
  roads, harbours, telecommunications and
  electricity
• Well-developed, efficient capital market and
  world class banking and financial services sector
• Low manpower costs by first-world standards and
  abundant supply of trainable labour
• Low cost of factory establishment (competitive
  efficient construction industry, low real estate
  cost)
• Abundant raw material availability and
  competitive tooling costs
• Competitive and efficient ocean freight and
  comprehensive airline network

11
Opportunities in South Africa

• What?
• Technology transfer
• Joint Venture production
• 2nd-tier supply
• Direct Investment
• Why?
• Advantage of a sustainable, low-cost
  manufacturing base
• Prospects for above-average economic growth in
  medium to long term
• Socio-political stability
• Sound macro-economic policies and targeted
  industry support
• Acknowledged good quality of life supported by
  first-world financial and IT infrastructureg

12
Thank You !

• NAACAM is ready to assist you to participate in
  the South African Automotive Industry
• roger_at_naacam.co.za
• www.naacam.co.za