The potential for long-term sales growth, particularly in the rest of Africa, outweighs the short-term perils of uncertainty in motor industry policy in South Africa, says Shinsuke Minami, global COO of Isuzu Motors.
He told Business Day that despite slower-than-expected sales growth in South Africa — largely because of the proliferation of cheap Chinese brands — the Japan-based company remains confident of overall growth across the continent. “If we were not confident, we would not continue to invest,” he said.
Minami was in the Eastern Cape recently for the opening of a R750m vehicle components manufacturing factory next to the Gqeberha vehicle assembly plant of Isuzu Motors South Africa (IMSA).
IMSA was the biggest single investor in the factory, which will provide vehicle panels and other components for the Isuzu D-Max bakkie. Other investors included the Industrial Development Corp, the Automotive Industry Transformation Fund, the Black Industrialists Scheme and Absa.
The factory belongs to VSL Manufacturing, which is 51% owned by black women.
IMSA MD Billy Tom said the investment will help his company achieve its short-term target of 50% local content in the D-Max. The South African motor industry local content average in cars and bakkies is below 40%.
Though best known among most consumers for bakkies, IMSA is also a market leader in the production and sale of medium-sized and heavy trucks.
Tom said that, like other established local producers, Isuzu is under pressure across all sectors from lower-priced products, particularly from China.
Minami said the price differential on trucks can be as much as 30%. “The competition will be even more severe in the future,” he said. Isuzu was able to bridge some of this gap through price cuts, but its main selling advantage lies in overall ownership costs.
Tom said fleet owners, the majority of Isuzu customers across all its product ranges, look not just at vehicle retail prices but also fuel efficiency, spare-parts prices and availability, and general customer service. One of Isuzu’s most popular truck lines runs on compressed local gas.
In the car and bakkie markets (Isuzu does not sell cars), Tom said the biggest challenge for South African companies is that government policy intended to encourage local manufacture is so full of holes that importers, mainly Chinese and Indian, are able to flood the market with cut-price products. Almost two-thirds of cars and bakkies sold here are imported.
That’s why Tom supports an industry plea to the government that duties on imported vehicles should rise from 25% to 30%. He said, “We must compete on equal terms with vehicles that are heavily subsidised in the countries where they are made, then dumped here. If not, we will become a country of customers and not manufacturers.”
Were it to run three daily shifts, IMSA’s Gqeberha assembly plant has the annual capacity to build 75,000 D-Max vehicles and 15,000 trucks. As things stand, it is building 30,000 and 3,600, respectively, on a single shift. Across the local industry, production levels are down because of the import incursion.
Tom and Minami however, remain positive. Isuzu sales are resilient in a local new-vehicle market showing strong recovery. But it is in the rest of Africa that Minami sees the biggest potential. In the short to medium term, he thinks D-Max exports there can double from 5,000 to 10,000. Isuzu also has assembly operations in Kenya and Egypt.
Some forecasters believe the African new-vehicle market, currently about 1.1m, could triple in the next decade as African free-trade legislation and continent-wide automotive investments take root.
Tom said, “This is where the growth lies. At Isuzu, we are positioning ourselves for the economic growth of the African continent. We are building local capabilities that enable our operations here in Gqeberha to serve as an automotive manufacturing hub for the region.”
