Toyota SA, which is owned by one of the biggest foreign investors in SA’s automotive industry, said it hoped to resume manufacturing at its Durban plant as soon as Tuesday.
The Prospecton assembly plant in the south of Durban builds Hilux bakkies, Fortuner sports utility vehicles, HiAce minibuses, Quest cars and Hino trucks. Later in 2021 it is set to produce SA’s first locally made mainstream hybrid car, the Corolla Cross, after a R2.7bn investment.
The plant has been shut for a week after riots engulfed KwaZulu-Natal and the country’s economic hub, Gauteng, leaving 215 people dead and malls, warehouses and shops looted and burnt down.
The company’s Japanese parent, Toyota Motor Corporation (TMC), sent a sharply worded letter to the eThekwini municipality on Thursday demanding clarity on plans to restore order to the city, saying the violence, which caught the government unawares in the wake of former president Jacob Zuma’s jailing, had left it “feeling very uncertain about the future of our business in KwaZulu-Natal”.
The automotive industry has been one of few bright spots in an economy that was struggling even before the Covid-19 outbreak plunged SA into its biggest GDP drop in about a century. The industry’s exports hit records in 2018 and 2019 and even after a sharp Covid-19-induced drop in 2020, it still generated R175.7bn in exports, according to data from the National Association of Automobile Manufacturers of SA.
While other sectors, such as mining, have been derailed by an unfriendly regulatory environment, the sector’s relationship with the government has so far been constructive. Toyota is one of the companies that pledged new investment during the 2019 investment summit hosted by President Cyril Ramaphosa, who has made attracting foreign capital central to his economic agenda.
The Toyota plant in Durban suspended operations on Monday last week as rioters brought chaos to the city and forced the harbour to close. That cost Toyota SA significant export losses and the company said the local unit risked losing business to other global affiliates “because our European customers will not wait for their orders”.
Closure of the N3 highway also prevented cars from reaching Gauteng, the company’s main SA market.
Toyota SA on Monday denied reports that the TMC letter was a disinvestment threat. It said: “The aim was to voice concern over the future risk of conducting business in KwaZulu-Natal and to understand what local and provincial government are doing to address long-term stability issues.”
The wording of the letter, however, suggests future funding could be affected. It says a stable business environment is necessary for new investments, noting that SA’s manufacture of the next Hilux bakkie model, due within the next four years, is “still in the planning phase”.
In case that implication isn’t clear enough, the letter states “this closure jeopardises Toyota SA’s future sustainability”.
At a time when the SA motor industry is pressing the government to encourage the local sale and manufacture of hybrid and electric vehicles, the TMC letter describes the Corolla Cross as a “graduation project” for alternative-energy vehicles and says that by threatening production deadlines, Durban’s unrest could cost Prospecton “the opportunity to challenge for other new products”.
Toyota SA said on Monday that responses from eThekwini and KwaZulu-Natal’s government “have gone a long way to assuage the fears of our parent company” and that assembly would recommence. It remains to be seen whether rioting can be successfully contained.
Other motor companies said on Monday they had been unaffected by riots. Toyota is the only major company in Durban. The others are in Tshwane in Gauteng and in the Eastern Cape. Volkswagen SA said its Kariega assembly plant, near Gqeberha, was unaffected. However, vehicle deliveries to KwaZulu-Natal were suspended as dealers shut up shop.
Ford, which earlier in 2021 made a R16bn investment to build the next Ford Ranger bakkie in Tshwane, said the plant closed on July 9 and was due to stay shut until the end of August for the installation of new equipment.
Mercedes-Benz SA said that while production at its East London assembly plant was unaffected, some dealers around the country closed operations. “Unrest also impacted our logistics operations, including the supply of vehicles to dealers and parts to service centres.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.