Government should do more to protect the local motor industry against unfair competition from imported products, Volkswagen Group Africa (VWGA) MD Martina Biene said on Wednesday.
Options could include allowing local vehicle manufacturers to monetise the nominal value of production credits and use this “many billions of rand” to reduce retail prices of their vehicles.
New-vehicle sales figures published this week confirmed the growing market share of imported brands, particularly Chinese.
With the aid of government subsidies in their own country, these brands are able to undercut, often substantially, the prices of SA-made vehicles.
In addition, as Toyota SA president Andrew Kirby observed recently, a “loophole” in the 2021-2035 Automotive Production and Development Programme (APDP) — which is intended to encourage investment in full-scale manufacture of vehicles and components — allows foreign companies to drastically reduce import duties through local assembly of semi-built vehicle kits requiring minimal investment in infrastructure, local content or employment.
Biene, whose company last year exported 131,485 vehicles, more than any other, but lost local market share to cheaper imports, said the domestic market was weighted unfairly towards imports.
She was firmly against duty protection — “That should be a measure of absolutely last resort” — but said government had to support an industry that employs about 120,000 people directly and hundreds of thousands more throughout the SA economy.
Kirby said the auto sector was actively deindustrialising at a time when the APDP is supposed to be doubling its size. The average value of local content in SA-made vehicles, for example, has fallen from 42% to 38% since the inception of the programme.
One obvious response, said Biene, would be to reduce the benefits for companies that don’t commit to full local manufacture. However, she said government should also reconsider APDP rules governing production credits. As things stand, mass manufacturers earn credits on every vehicle they build.
However, these credits may be used only to reduce import duties on products not made locally. VWGA, for example, uses credits earned through the manufacture of the Polo and Vivo ranges, to import Tiguan, Golf, Touareg and other vehicles. Biene said some companies earned more credits than they could use.
VWGA, for example was sitting with a nominal value of “many billions” of rand. If government would allow these credits to be converted into real value, local manufacturers could use it to reduce prices and become more competitive with imports. The APDP is due for review in 2026 but the motor industry is pressing government to bring the process forward to this year.
Though introduced in 2021, the APDP was formulated in 2018. Since then, the entire industry environment has changed. The APDP is intended to double production and employment, increase local content by 50% and deepen black participation in the industry.
In some cases, the reverse has happened. Biene said an early review was required to revise APDP goals in line with reality. A discussion on converting production credits into lower prices could be part of the discussion.
It would also have to include plans to increase manufacture and marketing of electric vehicles. Last year, government said it would offer investment incentives for the local production of all-electric, plug-in vehicles.
However, in response to industry pressure, President Cyril Ramaphosa has said government is now open to including hybrid vehicles, using both electric and petrol/diesel motors, and to offering consumer incentives to accelerate market demand.
The overwhelming majority of vehicles made in SA are petrol and diesel but much of the world, including most SA export markets, is going electric.
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