Motor vehicles, parts and accessories and other transport equipment (Q3 2015)

  • Sector: Motor vehicles, parts and accessories and other transport equipment
  • Quarter: Third
  • Year: 2015

The auto industry was the only manufacturing industry to rank among South Africa’s top five exporters. Transport equipment – mostly cars and car parts – contributed around a quarter of total manufactured exports (including bulk metals), although it accounted for less than seventh of manufacturing output. The value of imported transport equipment and inputs exceeded exports, in part because of car production for export depended largely on imported parts. More recently, the state has promoted local procurement of rail cars and locomotives as well as buses.

The auto industry has seen a dramatic recovery from the 2008/9 downturn. Production of transport equipment grew by 28,8% from third quarter 2013 to the third quarter of 2015, compared to a decrease of 1% from the third quarter of 2010 to the third quarter of 2013. From the second to the third quarter of 2015, however, production fell by 3,4% in seasonally adjusted terms.

The industry contributed 13% of total manufacturing production in the third quarter of 2015, up from 10,6% in the third quarter of 2013. It had accounted for 12% in the third quarter of 2010.

According to the Quarterly Labour Force Survey, employment in the industry came to 101 000 in the third quarter of 2015, down from 130 000 five years earlier and around the same as in the previous quarter.

Capacity utilisation fell in the past quarter, from 84,2% in the second quarter of 2015 to 81,6% in the third quarter. It had however risen markedly from 72,9% two years earlier, in the third quarter of 2013.

Exports of transport equipment came to 24% of total manufacturing exports in the third quarter of 2015, up from 18% two years earlier. They accounted for around 55% of total production of cars and other transport equipment in the third quarter of 2015, compared to 39% two years earlier.

In dollar terms, exports by the industry came to US$2,7 billion in the third quarter of 2015, from US$1,9 billion two years earlier and virtually the same as in the previous quarter. In rand terms, they climbed from R18,8 billion in the third quarter of 2013 to R32,6 billion in the second quarter of 2015, then increased to R35,1 billion in the third quarter. That said, the quarterly trade data are not seasonally adjusted, so the changes are not necessarily meaningful.

Imports of transport equipment accounted for 23% of all manufactured imports in the third quarter of 2015, compared to 22% in the third quarter of 2013. They equalled about 83% of local production of transport equipment in the third quarter of 2015, down from 90% in the third quarter of 2013. In rand terms, they had risen from R43,5 billion in 2013 to R45,1 billion in the second quarter of 2015, then climbed to R51,8 billion in the third quarter.

In August, Volkswagen announced it would invest R4,5 billion to produce new models in Uitenhage. Some two thirds of the sum will go for production capacity and most of the rest for supplier development. For comparison, Volkswagen invested just under R6 billion in South Africa from 2007 to 2014.

In November 2015, BMW announced a R6-billion investment to produce sports utility vehicles at its plant in Pretoria, with production expected to start around the end of the decade. This is reportedly the largest single investment in the South African auto industry. About half was expected to go to upgrade the Pretoria plant, and the rest for components suppliers, launch costs and training. Current incentive schemes mean that BMW will qualify for tax subsidies equal to between 20% and 30% of the total investment. The bulk of production was expected to go for exports (which would provide additional rebates for BMW), primarily in Europe, Australia and Asia but also possibly Nigeria.

In addition, BMW and Nissan announced in July that they would cooperate to roll out a national grid for recharging electric cars.

In November, Ford announced that production had started at an assembly plant for SUVs in Nigeria that used South Africa semi-knockdown kits. The plant would assemble around 3 000 cars a year.

The state has encouraged local production of locomotives and rolling stock for the major upgrades underway through Transnet and Prasa. In November 2015, feasibility study was announced into a planned R1-billion plant in Dunnottar in Gauteng to produce 580 new trains over the coming 10 years. The plant will be owned by Gibela Rail Transport, which has a R51-billion contract with Prasa. Gibela is in turn owned by Alstom (61%), Ubumbano Rail (30%) and New Africa Rail (9%). The contract requires 65% local content, so the Dunnottar complex will also accommodate components producers. The plant was initially expected to start production in early 2015, so it is already delayed.