South Africa’s auto industry needs to shift away from its focus on right-hand drive production and push for more exports, the Made In South Africa Automotive Conference was told. “Domestic sales growth will be modest at best and this will place the onus for growth squarely upon exports,” conference chairman Stephen D’Arcy said.
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“RHD is no longer the differentiator it once was,” D’Arcy, who is global leader of PricewaterhouseCoopers automotive practice, told delegates. And he warned that attracting further investment to SA in an increasingly competitive industry would prove more challenging than it had in the 1990s when the industry was boosted by the introduction of the Motor Industry Development Plan (MIDP) in 1995. “The extension of the MIDP to 2012 is a positive sign for the development of the auto industry in SA but eventually South Africa may have to prove its competitiveness without the aid of incentives,” said D’Arcy. “But the extension of the MIDP also poses serious questions about the future of the industry – specifically how will South Africa respond to the threat from China and Central Europe,” he said. The SA industry needed to concentrate on volume assembly on one platform and the discontinuation of older models. “Since the introduction of MIDP, car makers with export programmes have moved towards assembly of more volume on fewer platforms, but it should be remembered that these volumes are very small in global terms – Toyota Corolla assembly here is just 2% of the global Corolla total. “South Africa has benefited from the boom in premium brand vehicles, but again the country cannot allow itself to be content with success in just this segment. Recent investments will shift the balance towards export of non-premium products and it is imperative that South Africa proves this can work.” He also urged the SA supplier industry to build on its strengths. “The component industry here is benefiting from growth and diversification – it now has 12% of the world catalytic converter market and has seen significant growth in stitched leather components. “With China and other low-cost economies becoming a magnet for component manufacture, it is imperative that South Africa focuses on its growing reputation for high-value, high tech and specialised products. As well as protecting South Africa from cheaper competition, this also has benefits for the whole economy.” The growth of the Chinese market and its possible impact on South Africa’s auto industry was also highlighted by Asia automotive expert Michael Dunne, president of Automotive Resources Asia. He told delegates that despite the rapid growth of China’s car market with more than 100 vehicle assemblers, it was a top heavy industry, with little support for the assemblers further down the supply chain. “The Tier 2 and 3 supplier positions are more or less wide open. At that level, Chinese suppliers are not very good and there is scope for companies in SA to move in,” said Dunne. Automotive industry analyst David Leggett, managing editor of just-auto.com and a former director of automotive forecasting at the Economist Intelligence Unit, told delegates that he was surprised at how little South African car makers exported to the rest of Africa. Last year (2003) total exports into Africa were just 2,447 units, he said. There was probably scope for the South African industry to develop an affordable local car in the way that Renault was developing its €5,000 car with Dacia in Romania for Central and Eastern Europe markets. Sponsors of the first Made in South Africa automotive conference have announced that the conference will be held again in 2005.
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