After a tumultuous 2013 riven by damaging industrial action, South Africa's automotive trade body NAAMSA predicts that the country's automotive sector faces a 'difficult' year ahead.

Export sales in 2013 were negatively affected by a seven week strike in the automotive industry from middle of August through to the first week in October. As a result, aggregate 2013 total vehicle exports reached 275,822 units, well down from the Industry's original vehicle export projections of 336,000 units.

Assuming further improvement in the global economy and projected higher exports to African countries, Asia and North America - NAAMSA says that total South African auto export sales during 2014 could improve by some 55,000 vehicles or about 20% over 2013. Total Industry exports are projected to exceed 331,000 units during 2014 increasing to about 381,000 units in 2015.

However, NAAMSA sees a flatter picture for the domestic market and said that the trading environment will be difficult due to price rises reflecting the impact of currency depreciation on imported parts. NAAMSA said that the weakness in the rand during 2013 against major international currencies - a depreciation on a trade weighted basis of over 20% - has resulted in significant cost pressures in respect of imported content (used in locally manufactured vehicles) and imported vehicles.

The South African economy is projected to grow by around 2.9% in 2014 and NAAMSA sees a broadly flat picture for domestic vehicle sales in 2014.

Despite expectations of a difficult year, there were a number of positives that could lend support to the industry, NAAMSA noted. These included the low interest rate environment and the substantial ramp up in public sector infrastructure spending. Furthermore, the trade body said that demand by the car rental industry is expected to remain strong during 2014 and should continue to make a positive contribution on the back of further expected growth in tourism and business travel.

Factoring in the expected improvement in exports, domestic production of motor vehicles in South Africa during 2014 is expected to rise from the approximately 550,000 vehicles produced in 2013 to about 611,000 vehicles in 2014 - an improvement in vehicle production of about 11%.

NAAMSA has said it aims for a domestic vehicle production figure of close to 1m vehicles a year by 2020. However, it noted that 'one of the imperatives' for that is industrial relations stability and close cooperation between employers and unions to "improve productivity and overall efficiencies and to reduce the widening cost gap between SA producers and international competitors".

South Africa 2009 2010 2011 2012 2013 2014F
Vehicle sales (by sector)

Cars 258,129 337,130 396,292 442,604 450,440 450,000
Light Commercials 118,159 133,756 149,301 160,174 169,234 170,000
Medium Commercials 7,229 7,557 9,218 10,104 11,595 12,000
Heavy, Extra Heavy, Commercial Buses 11,705 14,464 17,438 17,737 19,351 20,000
Total Vehicles 395,222 492,907 572,249 630,619 650,620 652,000

Exports 2009 2010 2011 2012 2013 2014F
by sector

Cars 128,602 181,654 187,529 153,268 153,525 170,000
Light Commercials 45,514 56,950 84,125 123,648 121,095 160,000
Trucks & Buses 831 861 803 1,076 1,202 17,400
Total Exports 174,947 239,465 272,457 277,992 275,822 331,400

Source: NAAMSA