The Department of Trade and Industry has finally announced the Automotive Production and Development Programme, which will replace the long-standing MIDP (Motor Industry Development Plan) from 2013, and be in place until 2020.
The DTI’s new programme sets ambitious targets for the domestic motor industry, including the annual vehicle production of 1,2 million units by 2020.
- The APDP includes four main components:
- Stable and moderate import tariffs from 2012 of 25 per cent for completely built-up vehicles and 20 per cent for components used in vehicle assembly
- A local assembly allowance enabling vehicle manufacturers producing more than 50 000 vehicles a year to import 20 per cent of its components duty free, reducing to 18 per cent over three years
- A production incentive in the form of a tradable duty credit of 55 per cent on the value-added element of a component, measured from the selling price less the raw-material input. This would reduce to 50 per cent over five years. However, an additional five per cent would be available for vulnerable sub-sectors
- An automotive investment allowance, which would take the form of a direct grant to the value of 20 per cent of the project over three years. This would be used to support investment into new plant and machinery.
The National Association of Automobile Manufacturers of South Africa (Naamsa) on Thursday welcomed the announcement of the structure and provisions of the APDP, which is aimed at facilitating further significant growth and development of the South African component and vehicle manufacturing industries.
Naamsa president (and Toyota SA president) Dr Johan van Zyl, commended the DTI “for achieving “a major breakthrough in finalising a future automotive industry policy framework in line with South Africa’s international trade obligations”.
The DTI, he said, “managed to ensure that the key industry stakeholders accepted the imperative of a programme that balanced the needs of the automotive industry with Government’s policy objectives and the public interest.”
The APDP framework and provisions covering import duties, the local assembly allowance, a production incentive and investment allowances, “provided the South African automotive industry with a solid basis to rise to the challenge of becoming more internationally competitive and to expand the production of new cars and light commercial vehicles in South Africa.
Commenting on the elements of the automotive production and development programme, Dr Van Zyl said the local assembly allowance would “support the continued production of motor vehicles in South Africa” while the investment allowance, supplemented by the discretionary company specific allowance, “would provide incentives to stimulate domestic vehicle production” and “provide a strong catalyst for additional localisation”.
The release of the detailed elements of the Automotive Production and Development Programme from 2013 through 2020 will “enable vehicle manufacturers and their suppliers to plan strategically for the future and to finalise investment decisions with confidence and certainty. It should also enable various manufacturers to tender for the production of new models in South Africa”.
Dr Van Zyl said that “There was no doubt that the new programme would stimulate production of motor vehicles and automotive components and encourage further investment in the industry and assist the process of stabilizing and creating employment over time. At the same time, however, it should be recognised that the industry faced ever increasing competition – domestically and internationally”.
Individually, each vehicle manufacturer would evaluate the DTI’s announcement and the provisions of the new programme and manufacturers would, from a strategic and operational perspective, take steps to optimise their production plans and operations in terms of the post 2012 programme, he concluded.