The real contribution of the automotive industry to the SA economy could be up to 300% higher than estimated because the official figure excludes many of the activities that play a part, George Mienie, CEO of online vehicle retailer AutoTrader, has said.
He said the “fragmented” nature of the industry caused government to undervalue its importance.
Officially, the industry accounts for about 5% of GDP. About 60% of that comes from vehicle and components manufacturing and 40% from vehicle retail. But throw in lifetime costs of the estimated 12-million vehicles on SA roads — such as services, spare parts and insurance — and add the used-vehicle industry, and the contribution is significantly higher.
Then there are support industries supplying goods to the industry. For example, it has been estimated more than half the carpet material produced in SA is used in vehicles.
Put it all together, said Mienie, and the real GDP contribution could be as high as 20%. Renai Moothilal, CEO of the National Association of Automotive Component and Allied Manufacturers, described Mienie’s calculation as “not unreasonable”.
Whatever the exact figure, Chinese motor companies are enjoying a bigger share by dint of competitive pricing (so are a couple of Japanese and Indian brands but it’s the sheer scale of the Chinese invasion that is reshaping the market).
Cash-strapped consumers, forced to count every cent, are buying either smaller cars or new brands offering more car for less money.
“South Africans want value for money,” said Mienie. “European brands are finding it hard to compete with the Chinese.” German premium brands, particularly, are feeling the heat. Individually and collectively, their market share has shrunk considerably.
But that doesn’t mean they are less desirable, said Mienie.
Online customer searches on the AutoTrader website show that BMW is the most inquired-after brand. The conclusion is that people still aspire to own one — and a Mercedes-Benz, Audi and other premium brands — but can’t afford to.
To a lesser extent, the same applies to midmarket brands. Volkswagen may have lost share in the new-car market last year but you wouldn’t think it, to see the number of online searches. That advantage may not last indefinitely, however. Mienie said searches for Chinese vehicles almost doubled last year — albeit off a small base.
Interest in electric vehicles (EVs) is also accelerating, said Mienie. The government may still be making up its mind whether to offer consumer incentives to kick-start the local EV market but Mienie said online enquiries showed the public was increasingly keen to buy.
Much of the current interest is in hybrid vehicles with dual motors, one electric and the other a traditional petrol/diesel internal combustion engine (ICE). However, overseas experience, where there has been a marked fall in plug-in EV demand in some countries since price subsidies were removed, was creating caution here, said Mienie.
One of the biggest challenges overseas is that EVs’ resale value falls much faster than that of ICE vehicles.
“No country in the world has come to terms with the used-EV market,” said Mienie. “Not enough time has passed to properly understand it. We are likely to go down he same route. There are serious pitfalls.”
The government, he said, could move faster to encourage EV use. For example, the import duty on a built-up ICE car from Europe is 18%. On an EV, it is 25%. This goes back to the days when the only EVs being imported were golf carts.
The government has been saying for years that it will fix the anomaly but has still to do so. Closing the gap “would make a sizeable difference to EV prices” and stimulate the market, said Mienie.
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