PWC automotive expert Stephen D’Arcy, Wallenius Wilhelmsen Lines vice president Per Eitzen, General Motors SA director Ian Nicholls and Econometrix economist Tony Twine spoke at this week’s Made In South Africa Automotive Conference.
PWC automotive expert Stephen D’Arcy, Wallenius Wilhelmsen Lines vice president Per Eitzen and Econometrix economist Tony Twine spoke at the Made In South Africa Automotive Conference, which was held in Port Elizabeth this week.
D’Arcy, the chairman of the conference and a global leader of PricewaterhouseCoopers’ automotive practice, said South Africa’s motor industry needed to shift away from its focus on right-hand drive production and push for more exports.
"Domestic sales growth will be modest at best and this will place the onus for growth squarely upon exports," he said. "RHD is no longer the differentiator it once was".
D’Arcy warned that attracting further investment to South Africa would prove more challenging than it had in the 90s when the industry was boosted by the introduction of the MIDP in 1995.
"The extension of the MIDP to 2012 is a positive sign for the development of the industry, but eventually South Africa may have to prove its competitiveness without the aid of incentives.
"But the extension of the MIDP also poses serious questions about the future of the industry – specifically how will South Africa respond to competition from China and Central Europe," he said.
Build on one platform, discontinue older models
The South African motor 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 two per cent 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 added.
With regards to the automotive component industry, D’Arcy said the manufacturers had benefited from growth and diversification. South Africa now has 12 per cent 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," he added.
The growing Chinese market and its impact on SA
Asia automotive expert Michael Dunne, president of Automotive Resources Asia, told delegates that despite the rapid growth of China’s car market, 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 – 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.
A total of 2 447 units were exported into Africa last year, he said, adding that there was probably scope for the South African industry to develop an affordable local car in the way that Renault was developing its R42 000 car with Dacia for Central and Eastern Europe markets.
Vehicle exports to double by 2008
Per Eitzen predicted total vehicle exports from South Africa would double between now and 2008: "The biggest export markets would be Australia and New Zealand and after that Asia".
