The motor industry may seek an early review of the government’s 10-month-old automotive master plan because its goals may no longer be feasible in the allotted timespan, according to Mikel Mabasa, CEO of Naamsa.
Covid-19, a weak economic environment, the war in Ukraine and shortages of key automotive components have all played havoc with planned growth. Mabasa said that since the SA automotive master plan was officially signed off in November 2018, “we have seen a lot of adverse events, some catastrophic”.
He wondered whether the master plan’s goals are realistic “in view of the seismic changes we have seen”. The policy must also take account of the global shift towards electric vehicles (EVs). The government was due to publish an EV white paper last October but Mabasa said it was now expected only “in the next few months”.
The master plan came into force last July. By 2035, it wants annual SA vehicle production to top 1.4-million, employment at vehicle and components companies to reach 240,000, and the average value of local content in SA-made cars and bakkies to reach 60%. It also wants to create a black-owned components supply base.
All these targets were based on pre-pandemic projections. In 2019, the industry built 631,921 vehicles, a number that fell to 447,218 in 2021. This recovered to 499,087 last year but it is likely that production will recover to previous levels only by 2023 and perhaps even 2024.
“Covid-19 has set back the master plan by three years,” Norman Lamprecht, executive manager at Naamsa and the Automotive Industry Export Council (AIEC), said on Friday.
Local new-vehicle sales may match 2019 as early as this year but exports, which account for over 60% of SA-made vehicles and are dependent on global demand, are a tougher ask at a time of global economic and political uncertainty.
Recent events have complicated recovery. The global shortage of semiconductor microchips has forced Mercedes-Benz SA, among others, to reduce vehicle production. Toyota SA is still some way off resuming normal manufacture after its Durban assembly plant was affected by April’s calamitous KwaZulu-Natal floods.
Toyota’s woes have had a knock-on effect on its components suppliers. Shivani Singh, commercial director of the National Association of Automotive Component and Allied Manufacturers (Naacam), said that while major components companies — many of them subsidiaries of multinationals — have enough resources to tide them over, smaller local companies providing them with sub-components are not so lucky.
Some are struggling financially because of the temporary loss of revenue. Singh said Naacam and the Industrial Development Corporation (IDC) are among the organisations trying to help them ride out the storm.
She was speaking in an interview after Friday’s launch by Mabasa and Lamprecht of the AIEC’s 2022 export manual, which reported that the SA motor industry achieved a R39.1bn trade surplus last year. This was down from the previous year’s record R48.2bn after local new-vehicle sales saw many more imported vehicles reach the market.
Local automotive policy is trade-based: the industry exports most of the vehicles it builds but also imports most of those it sells locally. Most components in SA-made vehicles are also imported.
Exports of vehicles and components grew 18.1% from R175.7bn in 2020 to R207.5bn last year, but imports expanded by 32.1% from R127.5bn to R168.4bn.
Of the components total, 50.4% came from catalytic converters, which are platinum-based devices that reduce exhaust emissions in vehicles using petrol- and diesel-based internal combustion engines (ICE).
This dependence on converters is a concern given that demand will reduce dramatically in the next few years as major export markets ban ICE vehicles. Singh, however, said SA has the skills and “indigenous” raw materials to make up the shortfall.
For example, SA has a world-class plastics industry able to become more involved in automotive componentry. And instead of sending raw copper overseas for processing before it could be used in vehicles, SA should beneficiate it locally. “There’s a lot more we can do to future-proof the industry,” she said.
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