Automotive industry in South Africa
South Africa is traditionally the leader in Africa of the automotive industry and now produces more than half a million automobiles annually of all types. While domestic development of trucks and military vehicles exists, cars built under license of foreign brands are the mainstay.
Contents
The modern automotive industry in South Africa was launched in one thousand nine hundred ninety five and has since provided a large amount of exports. It has motivated global motor vehicle manufacturers to grant production contracts to South African factories. [1] South Africa has been engaged in the assembly of motor vehicles and light truck models since the 1920s, with the country’s main international manufacturers being:
These manufacturers are all concentrated in the Provinces of Eastern Cape, Gauteng and KwaZulu-Natal. With the Motor Industry Development Programme (MIDP) having doubled in size inbetween one thousand nine hundred ninety four and 2012, [Two] it resumes to grow, and in latest history it has seen its successor Automotive Production and Development Program (APDP) enforce fresh aims, hoping to achieve local production of 1.Two million vehicles annually by 2020. [Three]
Volkswagen has had a factory in Eastern Cape since the early 1950s, which now employs around 6,000 people and produces 120,000 vehicles per year, of which 40,000 are exported to fellow African countries. The Volkswagen group holds a market share of approximately 22.1% in South Africa.
BMW caters to Five,000 employees in South Africa and manufactures around 55,000 automobiles a year. The BMW Rosslyn Plant in Gauteng was founded in one thousand nine hundred sixty eight and plays an significant role in the production of equipment used in vehicles. [Four]
A Mercedes-Benz manufacturing plant was founded in Eastern Cape around 1954. It produced 55,900 vehicles in 2010, and in the same year the local market eyed Mercedes-Benz sell 25,400 cars and 6,100 trucks. [Four]
MAN has been present in Africa since 1968. It does fairly well in South Africa, maintaining two plants and a “spares” depot, employing three hundred ninety three citizens who produce around Two,500 vehicles annually, which sell almost entirely on the Southern Africa markets. [Four]
Nissan also has a plant in Rosslyn, manufacturing mostly bakkies. [Five] [6]
Early days Edit
The early days of the South African motoring industry were focused on British makers and, to a lesser degree, American makers. Volkswagen was also a long-term presence, being particularly popular with those Afrikaners who were unwilling to buy a British car. [7] By the late 1970s, Japanese producers had gained a foothold, and British makers were being shoved out. In the late seventies, Sigma Motors had planned to merge with British Leyland, known as Leykor locally – when this merger failed, Leyland had to scramble to create an all-new dealer network in only a month. [8] Leyland’s South African presence never recovered.
After the fuel crisis, the large American cars which had been very popular dropped in sales drastically. By the end of the 1970s, the Mazda three hundred twenty three and the Volkswagen Golf were the fattest sellers and American-designed cars were no longer regularly available. For a while, the request for big saloons had been met by assembling the somewhat more compact Australian Fords and Holdens, but these were discontinued in favour of more compact European designs. [9] one thousand nine hundred seventy six displayed the worst sales numbers since 1972. [Ten] Chrysler SA went belly up soon thereafter, merging with Illings (Mazda) to form Sigma. Chrysler had been very successful in the late sixties, with the Valiant range being the most sold passenger car in 1966, 1967, and 1968, but began a serious slide after that. [11] The acquisition of Mitsubishi gave Chrysler a stay of execution but the severe economic climate of the latter half of the 1970s proved too much.
Growth Edit
The automotive industry catered to 303,000 employees in South Africa in 2003, and in two thousand four the country exported fully assembled motor vehicles to fifty three countries including many developed countries such as Japan, the United States, the United Kingdom, Australia and Germany, with many of the manufacturers based in South Africa now making it their main production base. In 2004, South Africa was responsible for the manufacture of 84% of all vehicles produced in Africa, seven million of which are on the South African roads. Also in 2004, the industry made a 6.7% contribution to the GDP of South Africa and 29% of all South African manufacturers made up the country’s automotive industry. Two thousand four also spotted 110,000 vehicles exported from South Africa of which 100,000 were passenger vehicles. [1]
In two thousand seven the automotive industry grew again, producing over 500,000 vehicles annually. While amounting to a puny fraction of the global vehicle production of seventy three million,this made excellent contributions locally, making up 7.5% of the country’s GDP. In two thousand ten the National Association of Automobile Manufacturers of South Africa (NAAMSA) reported that fresh vehicle sales exceeded their initial expectations of 7%, with large local growth permitting it to reach 24%, providing a big boost after the 2008/09 recession. This was evident in two thousand ten with 271,000 vehicles being exported, more than dual what was seen in previous years. [12]
Regulations for local content requirements very first appeared in the 1960s and were fairly stringent, and led to a limited number of cars being available to South African motorists. Beginning in the late 1960s, engines had to be built locally for the car to be considered a local product. Phase III of the requirements, for example, was planned for introduction in the 1970s and required local content to reach seventy percent of a vehicle’s total weight. Manufacturers also received tax rebates for extra local content. Early in the program, models were often sold as “proclaimed manufactured”, but the government step by step began enforcing the standards and imposing penalties. [13]
The South African government has provided substantial support for the automotive industry in the past twenty years and is still identifying it as a key growth sector. In a Department of Trade and Industry (dti) Budget Vote Address delivered in July 2014, Trade Minister Rob Davies said that “given that automotive and component manufacturing comprises 30% of our industrial sector, with strong linkages to other manufacturing sub-sectors, the influence of such investment on our domestic economy is significant.” [14]
The Department of Trade and Industry has provided a series of programs in order to assist the sector. The very first of the programs—the Motor Industry Development Programme (MIDP)—was introduced in 1995. The program had the following key objectives:
- Improvement of the South African automotive industry’s international competitiveness
- Improvement of vehicle affordability in the domestic market
- Encouragement of growth in vehicle and component manufacturing, mainly through exports
- Stabilizing the employment levels in the industry
- Creating a better foreign exchange balance in the industry
The program is considered a superb success. Under the MIDP, the sector has been exhibiting significant growth – it almost doubled in size since 1994.
Its successor is the Automotive Production and Development Programme (APDP), which was implemented on January 1, 2013. The APDP’s main objective is to at the same time stimulate the expansion of local production to 1.Two million vehicles a year by two thousand twenty and increase significantly the local content. The intention is to achieve this through investments, unlike the MIDP which relied mainly on exports. According to the National Association of Automotive Component and Allied Manufacturers (NAACAM), the program has four poles:
- Import Duty
- Vehicle Assembly Allowance (VAA)
- Production Incentive (PI)
- Automotive Investment Scheme (AIS) [15]
The fourth pile is not a fresh initiative but a revised incentive. The Automotive Investment Scheme (AIS) was very first introduced in 2010/2011, and, since then, incentives in the public sector have amounted to R6.Three billion and supported investments worth R23 billion by original equipment manufacturers in the automotive sector.
Quality Edit
Quality is a big factor in production. A factor such as quality can be a defining factor in the success of an industry. [16] Since around 7% of South Africa’s economic output is attributed to the automotive industry, it is understandable that the government and companies within South Africa have been attempting to encourage greater quality and greater productivity. [17]
The government has been using stricter controls as a way to improve quality. This seems to be working as large improvements in quality have been achieved, and the industry as a entire is more investable to foreign countries. The objective is to achieve production quality equal to that of manufacturers with the highest standards in the automotive industry. [Legitimate] With the quality of cars reaching comparable levels to those manufactured in western Europe, exports are enhancing. Production has been down, but quality has gone up and is yielding more profit.
Productivity Edit
The majority of South African automotive companies have been vocal about their concerns about productivity. While labour productivity in the sector enhanced by 37% from one thousand nine hundred ninety three to 2001, companies still have concerns about the productivity levels they can achieve in the country. Latest low productivity levels have been attributed to management. Both inadequate management and low trust in management have contributed to a lull and decline in productivity. [Nineteen] With labour productivity and transportation being said to be the two thickest problems in the industry, it has become an significant issue in need of addressing.
South Africa has numerous options for nurturing its vital automotive industry and improving productivity through regulation or through investment in automation or through other creative ideas. [20]