“Made in South Africa” Mercedes C class sedans may soon be seen on the streets of New York, Los Angeles and Detroit.
Go deeper with GlobalData
According to Reuters, if American automobile executive Sam Steinmetz has his way, the Mercedes C class plant in East London, on the Indian Ocean, would “very soon” be producing left-hand-drive cars for the United States.
Steinmetz is production manager at DaimlerChrysler’s plant in East London, which makes all right hand drive C-class sedans.
According to Reuters, Steinmetz and other executives say they want to nearly double production in East London to 80,000 cars a year from 42,000 – and are keen that the additions be left-hand-drives.
Port capacity in East London is being upgraded to meet the upsurge in exports, port officials told the news agency.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataDaimlerChrysler reportedly is keen to track rival BWM to exploit the US market under the Africa Growth and Opportunity Act (AGOA), which guarantees duty and quota-free access for goods from signatory African nations to the US market.
Exports to the US rose 53% in 2003 from 2002 from the 38 sub-Saharan African countries which qualify for AGOA benefits and Congress this year extended the agreement to 2015, Reuters said.
For Mercedes, AGOA’s tariff reductions reportedly mean a significantly lower cost for US consumers.
“We would like to double production here and have the capacity to do so,” Steinmetz told Reuters, adding: “Our target is the US market under the AGOA arrangement. AGOA presents a unique opportunity for us.”
Reuters noted that multinational automakers such as DaimlerChrysler, BMW, Volkswagen and Toyota have consolidated their positions in South Africa to take advantage of the government’s motor industry development program (MIDP) and low labour costs compared to Europe.
The MIDP aims to turn South Africa into a base for exports of auto products and create jobs – a key priority in a country where around one in three working-age adults has no job, the report said.
Under the scheme companies involved in export programmes reportedly can import vehicles and components at lower tariffs – components for medium and heavy vehicles, excluding tyres, are duty free.
Reuters said some 45% of the cars from East London are exported to the United Kingdom while Japan and Australia take 11% each and South African itself takes 25 percent – the balance is sprinkled across Africa and other parts of the world.
Hansgeorg Niefer, head of manufacturing at the East London plant, told the news agency DaimlerChrysler would continue to import 60% of raw materials for production of C-class models, allowing enough local content for the cars to qualify as South African – under AGOA, at least 30% of a product has to be local content to qualify.
Reuters said DaimlerChrysler is in the top bracket of employers in South Africa, giving their 5,590 employees in East London an average salary of 4,000 rand ($648) a month, around one fifth of the wages paid to workers at plants in Germany.
“Labour stability is a major plus for us and we are among the top payers in South Africa,” Niefer reportedly said.
“We are very labour intensive in East London compared to other manufacturing plants, but in terms of quality we want to be judged by the same international standards of our sister operations in Germany and we are equal right now,” Niefer told Reuters.
The news ageny noted that DaimlerChrysler is seeking to save €500 million ($607 million) in annual staff costs at Mercedes, its most profitable unit, but employee representatives have so far agreed to measures yielding only a fraction of that.
The group reportedly said in early July it might cut 6,000 jobs at the Sindelfingen plant and shift some production of the new C class Mercedes model to other plants in Germany and South Africa.
Reuters said the company has threatened to move production of the new C class car, due in 2007, to its more efficient Bremen plant in northern Germany and to its East London factory in South Africa as well as drop plans to build derivative models.
“If you asked, I would say that we are ready to move forward with expansion but a final decision will have to come from Germany (DaimlerChrysler AG),” Steinmetz told the news agency.
BMW manufactures some 55,000 sedans at its 3-series plant near Pretoria, and exported 41.6% of these to the US market last year under AGOA, spokesman Clinton Yon told Reuters.
“To be competitive, we have to be aggressive and the US is the key,” Steinmetz told the news agency.
Should East London clinch a deal to build the C-class for the US, it will not be the first time DaimlerChrysler has used tax advantages in a low-wage country to supply the model to the States.
Back in February 2001, just-auto reported that DaimlerChrysler of Brazil was about to ship its first batch of 36 locally-assembled C-class sedans to the United States even though C-class models sold in Brazil were being imported fully-assembled from Germany.
This unusual situation was due to unique Brazilian tariff regulations applicable to vehicle components imported from overseas for local assembly.
If a vehicle is solely for export, its components can temporarily be imported into the country free of industrial product tax.
C-class assembly from German CKD kits started in January 2001 at the DaimlerChrysler plant in Juiz de Fora, Minas Gerais state, and the company expected to build and export 7,000 units to the United States and Canada in 2001.
The Juiz de Fora plant assembled the V6 petrol engine-powered C240 and C320 versions with Elegance and Avantgarde trim for the US, as well as fully manufacturing the A-class for sale in Brazil and other Latin America markets.
(Members only): EXCLUSIVE: BRAZIL: Mercedes-Benz begins C-class exports to USA and Canada
