With domestic sales taking a knock, the automotive industry says it is eyeing the African continent to alleviate the gloomy outlook for 2019.
National Association of Automobile Manufacturers of SA (Naamsa) executive director and CEO Mike Mabasa said on Friday that 2019 will be “a very flat year”.
“We are not anticipating any growth in vehicle sales in 2019,” he said. Gross domestic product shrank 3.2% or R56bn in the first quarter of 2019.
Naamsa announced in May that aggregate domestic sales fell an annualised 5.7% to 40,506 after growing only 0.7% in April. Export sales fell 8.8% or by 2,866 vehicles, compared with the 32,716 in the previous year.
Added to this is the threat posed by the looming wage talks between Naamsa and the largest trade union in the sector, the National Union of Metalworkers of SA (Numsa).
The union warned the industry on Friday that negotiations will be difficult. It said the impact on the economy will be huge if the talks are protracted.
The multiyear wage Numsa-Naamsa agreement comes to an end on June 30. The wage agreement in the tyre sector will also end in June, while the motor sector is due for wage talks around August/September.
Mabasa said Naamsa is to embark on a roadshow in Ethiopia soon, before exploring other African countries for export opportunities.
“In Africa we are still underperforming in terms of our export numbers,” he said, noting that 620,854 vehicles were manufactured in SA in 2018, with 60% of that destined for the export markets including the EU.
The aim is to drive local vehicle production numbers to 800,000 by 2023, according to Naamsa’s five-year business plan.
Mabasa said Morocco is a big concern as it is hot on Naamsa’s heels competitively speaking. The north African country manufactured about 300,000 vehicles in 2018.
Morocco’s proximity to EU member states means the country can move its products quicker, which also means lower costs of doing business.
“Pressure continues to grow … [but] SA manufacturers remain competitive. We need to start making vehicle sales in SA cheaper,” said Mabasa.
“Currently, about 42% of the vehicle costs goes to government in the form of VAT, carbon tax, tyre levy, etc. There’s no incentive to buy locally produced vehicles.”
SA also needs good infrastructure such as proper rail networks and ports to remain competitive. “Do you know that 70% of the BMW X3s that are manufactured at the Rosslyn plant are for the export market?”
Mabasa said the Passenger Rail Agency of SA and Transnet are “spending more time at the state capture commission, instead of serving us”.
The two government entities are implicated in state-capture allegations involving the Gupta family, friends of former president Jacob Zuma.
SA exported 351,139 vehicles in 2018 with a value of R127.5bn, while total exports accounted for R178.8bn.
Mabasa remarked this is a huge contribution by the industry to the SA economy.
The seven original equipment manufacturers’ planned investment for 2023 is over R40bn.
The investment is aimed at unlocking more than R20bn in automotive component investments, and creating space for black industrialist participation at tier 2 and tier 3 of the industry value chain.
“We are clear what needs to be done. We are fairly comfortable with the plan we have put in place, we have an opportunity to turn the tide. The ambition is to grow the industry as much possible as we can,” said Mabasa.
Internationally, Naamsa is talking to its counterparts in the UK about Brexit. .
“We would like to see the UK leaving the EU with a decent deal. A no-deal or hard Brexit will put pressure on SA’s export business.”
The UK has an October 31 deadline to leave the EU.
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